Ms. Lee had long been investing in stock margin trading with a brokerage firm. One day, the stock market was volatile and Ms. Lee received a call from Mike, her broker, at 10 am requesting her to deposit money into her account by 11 am that day in order to maintain the margin level requirement. She made the deposit right away and immediately called Mike to inform him of the deposit she made. Mike requested her to send him a copy of the pay-in slip as confirmation of the deposit. Ms. Lee did not have access to the fax machine at that time. She gave the transaction reference number to Mike instead and asked him to call back if it was not acceptable. Mike called back Ms. Lee the next day. He liquidated her position on the ground that he did not receive her pay-in slip before the deadline.
Ms. Lee was upset. She thought that she had fulfilled the margin requirement before the deadline. She complained to the brokerage firm. The brokerage firm stated that they were unable to locate a client’s deposit without a pay-in slip and they had the right to liquidate a client’s position to manage risk.
Ms. Lee made an application for mediation at FDRC and the case did not settle. She then opted for a “papers-only” arbitration at the FDRC.
Having considered all the documents and information provided by both parties to the arbitration, the arbitrator from the FDRC List of Arbitrators proceeded to issue an arbitral award. In the arbitral award, the arbitrator held that the brokerage firm had the right to liquidate Ms. Lee’s position under their contract but due to the poor communication on the part of the brokerage firm, a small amount of money was awarded to Ms. Lee.
(The case studies are based on actual FDRC cases. Various information including names of claimants, financial institutions and their staff, actual claim and settlement amounts have been altered to protect confidentiality of parties.)