Kakao Pay Securities has acknowledged that its customer service center provided incorrect collateral ratio guidance that led to forced liquidation losses for an investor. However, the investor and the brokerage remain sharply divided over the scale of damages.
According to a post on an online community on the 24th, Kakao Pay Securities user A saw the collateral ratio on stocks purchased through margin financing fall below the required threshold on the 28th of last month amid a sharp market decline. Margin financing allows investors to borrow money from a brokerage to buy stocks. If a decline in share prices pushes the collateral ratio below the maintenance requirement and the investor fails to cover the shortfall within a specified period, the brokerage may forcibly dispose of the holdings regardless of the investor’s wishes—a process known as a forced liquidation.
A contacted the customer service center to ask what collateral ratio was needed to avoid a forced liquidation. The representative at the time advised that “maintaining a collateral ratio of 120% or higher will prevent a forced liquidation.” A claims to have deposited ₩76 million (approximately $55,000) into the Kakao Pay Securities account at 4:38 p.m. the same day, immediately after the call, to meet the advised ratio.
The problem surfaced the following day, the 29th, when A’s holdings were forcibly liquidated. Upon contacting the customer service center again, A discovered that the actual collateral ratio required to avoid forced liquidation was 140%, not 120%.
A claims that forced liquidations totaling approximately ₩1.5 billion (approximately $1.1 million) occurred across five stocks: SK Hynix (000660.KS), Naver (035420.KS), Kumho Engineering & Construction (002990.KS), Daewoo Engineering & Construction (047040.KS), and Jusung Engineering (036930.KS). A also stated that “₩130 million (approximately $94,000) in cash was deposited based on incorrect guidance alone,” expressing frustration over the losses.
Kakao Pay Securities has acknowledged that the collateral ratio misguidance led to forced liquidations. However, the firm disputes the scale of damages claimed by A.
The brokerage stated that four of the five stocks A mentioned had already been subject to forced liquidation before the customer service center’s erroneous guidance was provided. Only one stock’s liquidation was directly tied to the misguidance, the firm explained. A Kakao Pay Securities official said, “The disposal scale claimed in the post differs significantly from the actual figures,” adding that “most of the disposals were separate transaction settlements executed in accordance with relevant regulations, unrelated to the consultation guidance.”
The two sides also differ on disposal pricing. Kakao Pay Securities explained that the disposal price of the stock liquidated due to the erroneous guidance exceeded both the day’s average trading price and the closing price. The firm argues that, based solely on the forced disposal price itself, it is difficult to conclude that additional price losses occurred.
Regarding compensation, the brokerage said it is “calculating damages based on relevant legal precedents, using the cost required for the investor to reacquire the same stocks and quantities at the time the investor became aware of the forced liquidation, and is in discussions accordingly.”
The period when A faced the collateral shortfall coincided with extreme volatility in South Korea’s stock market. On the 28th of last month, the KOSPI plunged 10.84%, followed by a further 5.98% decline on the 29th. It closed down 1.23% on the 30th before surging 17.91% on the 31st. A’s stocks are reported to have been liquidated through forced sales on the 29th and 30th.
This case illustrates how a simple guidance error at a brokerage’s customer service center can lead to large-scale investment losses. Given that it occurred at a time when margin-financed investors were particularly sensitive to collateral ratio management during a sharp market downturn, controversy over the accuracy of brokerage consultations and the scope of their responsibility is expected to continue for some time.