Today, a retail investor shared his grievances online, stating that he suffered a forced liquidation due to a mere 400 New Taiwan Dollars, sparking discussions among netizens.
(Background: Taiwan OTC Crimes | Bamboo Union Gang Leader Conspires with Retired Police Officers, Hides Real Cash Among Fake Bills, Defrauds 1 Million NT Dollars in ETH)
(Additional Background: Is Taiwan a Kingdom of Fraud Due to Lenient Penalties? A Comparative Analysis of Fraud Penalties in Taiwan, Mainland China, Japan, and South Korea)
Today, a small investor’s post on the Dcard stock forum ignited heated discussions among netizens. In brief, he described how multiple unsuccessful communications with his brokerage (the customer service was unreachable) and a poor user interface on the trading platform led to his forced liquidation over just 400 NT Dollars.
If you only trade cryptocurrencies, you may not know what forced liquidation means. Simply put, “forced liquidation” refers to a situation where an investor, after buying and selling stocks on the trading day (T day), is unable to complete the payment for the stock by the settlement day (T+2 day).
What happens during forced liquidation?
In the cryptocurrency sphere, this situation is somewhat similar to a margin call. However, today I want to remind everyone: forced liquidation not only incurs penalties but can also cause significant damage to personal credit. In severe cases, it may even lead to criminal liability, which should not be taken lightly.
1. Civil Liability:
Brokerages can charge clients a penalty fee of up to 7% of the transaction amount. If the account balance is insufficient, the brokerage can continue to pursue the investor for the debt, including seeking court orders for wage garnishment.
2. Criminal Liability:
If the circumstances of the forced liquidation are severe enough to impact market order, one could face criminal penalties ranging from more than 3 years to less than 10 years.
3. Credit Record with Financial Institutions:
Records of forced liquidation will be reported to the joint credit reporting system of brokerages, and financial institutions can access your “poor credit record.” If you want to apply for a credit card or a mortgage in the future, you are likely to encounter difficulties (the investor has already been barred from placing orders with brokerages in the future).
Having read this, you should understand how serious the consequences are. As for how this investor ended up in this situation, I’ve compiled the full content he shared below, hoping it can serve as a warning.
Today, I was “forced” into liquidation. Why do I say “forced”? Because this company’s system is incredibly poor. I bought a stock on August 5, expecting to sell my existing shares to cover this new stock. However, several orders did not go through, and by the time I realized it, trading had already closed, leaving me unable to sell.
The system anticipated a settlement of 160,000 NT Dollars on August 7. I thought I would call my broker to confirm if I could sell the next day and apply for T+0 to cover the payment, so I wouldn’t have to add more funds, but the broker’s phone was unreachable from 3 PM until 4 PM when they closed.
The next day, I sold the shares I intended to sell, and while I was operating, I kept trying to call my broker. Each time, I was on hold for over 30 minutes, from 9 AM until they closed at 4 PM, and I never got through. Ironically, I kept receiving texts about insufficient funds for the settlement?
There was no time to answer calls, but there was time to send texts? In any case, I sold all my orders, and the system anticipated a refund of 240,000 NT Dollars on August 8. Since I couldn’t get through on the phone, the smart assistant was just a basic search engine and couldn’t help with anything. I had no choice but to transfer money from another bank into the settlement account. After confirming that the amount was sufficient, I left it alone.
This morning, I checked the balance to ensure it was adequate and found a charge for a previous expense. The remaining balance was still enough, so I closed the app, but unexpectedly, trouble arose… At 10:50 AM, I missed a call from a financial advisor. At 10:52 AM, I immediately called back, but again was on hold. After waiting for 5 minutes, I hung up, only to find a notice of forced liquidation in my email, stating I could call or reply if I had any concerns.
I had called for three days without being able to reach anyone. If I continued calling slowly, wouldn’t that be foolish? So, I quickly took a screenshot of my account and the anticipated settlement and emailed them for confirmation. Five minutes later, my phone rang.
Financial Advisor: , Me:
: Hello, sir, we received your email. What seems to be the issue?
: I just received a notice of forced liquidation, but I’ve checked several times and the account has enough funds. Could you please verify it again? The advisor then seemed to check the account or call someone else.
: Sir, I checked for you, and your account had a hold on it, which caused the deduction to fail. A total of 400 NT Dollars was on hold. We will send you more information later, and I should also let you know that there may be a penalty of up to 7%.
: …I had a hold of 400? I just confirmed the amount this morning and even noticed a charge for an expense, and I recalculated to ensure the funds were sufficient! Moreover, your system didn’t show any holds! Now I’m facing forced liquidation because of this! What should I do?
: We have already reported it, and we cannot retract it at this stage. We will notify you of further information. If you are dissatisfied with our service, you may switch to another brokerage.
: I use your brokerage for trading, and my settlement account is also with you. The hold was not even displayed, and I confirmed multiple times that the account had enough funds to cover the payment. Now, I face forced liquidation, my credit will be affected, and I have to pay a 7% penalty. Is this reasonable?
Since yesterday, your phones have been completely unreachable. I couldn’t even confirm anything. I understand that many exchanges have been overwhelmed due to the recent stock market crash, but I’ve been trying to reach you since morning until you closed. Almost every time, I was on hold for over 30 minutes, yet never managed to get through. Doesn’t that seem strange? I want to file a complaint; please tell me how to proceed. Also, please provide me with a reliable contact number.
: If you cannot reach us after multiple attempts, you can call the customer service center. Complaints should also be handled through the customer service center. For now, I can only report this and will notify you of further information later.
: Your answering machine keeps saying to redirect to the customer service line, and for account and payment issues, to continue waiting online. How can I know if customer service can help? Is it me with the problem, or your company? I have not been able to get through all day; isn’t that strange?
: Uh…
: I’m filing a complaint right now, and then I hung up the phone to call customer service to file a complaint, demanding a response within the day. Oh! I also deposited an additional 3,000 into my account, hoping for a miracle. How naive! At 4 PM, my account was charged the forced liquidation fee of -400, and the same person called me again.
: Hello, sir, we have received your complaint. I want to explain that once reported, it cannot be retracted, and you will receive subsequent information via email or phone.
: Hmm (so angry I don’t know what to say)
: … (I remained silent, and then they hung up) An hour later, a more senior financial advisor called to check in, but the basic content was the same; she emphasized that while both are under the same umbrella, they are different companies, and they cannot know the reason for the failed deduction; a failed deduction must be reported immediately.
In any case, I am now confirmed to be in forced liquidation. My accounts have been locked, and tomorrow, I will likely continue calling to ask how to resolve this. Here, I sincerely advise anyone using the large brokerage series to run. This company’s financial advisors are always unreachable, and when issues arise, they won’t assist you and cannot handle anything.
I believe that while you operate your stocks yourself, you should still seek help when problems arise. A brokerage that has only an app and nothing else will never be my choice again.
Advice from netizens to avoid forced liquidation:
In response to the investor’s predicament, some enthusiastic netizens provided six major suggestions:
1) Many people often say that brokers are unimportant, unnecessary, or not needed (this has been said about many sales professions), just looking for the lowest fees.
2) Even after what happened to this investor, I see many people still asking about discounts and comparing transaction fees instead of trying to find their own brokers. In fact, for most people, even if their transaction fees differ by 10% over a month, it doesn’t amount to much money.
3) The investor thought he could change T+2 to T+0 to cover the liquidation payment. I believe brokerages have their own operations and regulations.
4) The investor did not understand the account opening process and opened it online without designating a broker, so he did not have a dedicated broker to help him, and after opening the account, he was not prepared to know who to contact if issues arose; this was also a result of his carelessness or lack of research.
5) This investor stated that using a debit card led to the bank’s funds being held, causing the brokerage to deduct insufficient funds. Would the brokerage know this? They simply deduct from the available balance. I find it hard to understand why he blames the brokerage.
6) Next time, a few years from now, remember to find a broker. Don’t buy a car, an insurance policy, or a house next year and then say you don’t need a certain broker, just wanting cheap and fast services.
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