Today, a retail investor expressed his grievances online, sparking discussions among netizens, after he faced a default settlement due to a mere NT$400.
(Background:
Taiwan OTC Crime | Bamboo Union leader colludes with retired police officers, hiding real cash among counterfeit bills, defrauding NT$1 million in ETH)
(Taiwan’s status as a fraud kingdom: Is it due to lenient criminal penalties? A comparison of fraud penalties in Taiwan, Mainland China, Japan, and South Korea)
A small investor’s post on the Dcard stock forum has ignited heated discussions among netizens. In summary, the situation arose because his repeated communications with the brokerage failed (customer service was unreachable), combined with the poor user experience of the brokerage platform he used, resulting in a default settlement over just NT$400.
If you only trade cryptocurrencies, you may be unfamiliar with what a default settlement is. Simply put, a “default settlement” occurs when an investor is unable to complete the payment for stock purchases on the settlement date (T+2) after buying and selling stocks on the trading day (T).
What happens in a default settlement?
In the cryptocurrency world, it is somewhat akin to a liquidation. However, today I want to remind everyone that a default settlement not only incurs fines but also causes significant harm to an individual’s credit, and in severe cases, may even lead to criminal liability, making it imperative to be cautious.
1. Civil Liability:
Brokerages can charge clients a default penalty of up to 7% of the transaction amount. If the balance is insufficient, brokerages can continue to pursue the debt from the investor, including requesting the court to enforce salary deductions, transferring monthly salaries to the brokerage.
2. Criminal Liability:
If the circumstances of the default settlement are severe enough to affect market order, one may face related criminal penalties of more than 3 years and less than 10 years.
3. Credit Record with Financial Institutions:
Records of default settlements are reported in the joint credit reporting system of brokerages. Financial institutions can access your “poor credit record,” making it highly likely that you will encounter difficulties when applying for credit cards or mortgages in the future (this investor has already been banned from placing orders with brokerages).
At this point, you should understand how severe the consequences can be. As for how this investor’s situation unfolded, I have compiled the content he shared below, hoping it serves as a warning for you.
Today I was “default settled.” Why do I say “was”? Because this company’s system is terribly flawed. I purchased a block of stocks on August 5, intending to sell my existing holdings to offset the purchase of this stock. However, several orders did not go through, and by the time I realized, the market had closed and I was unable to sell.
The system anticipated a settlement of NT$160,000 on August 7. I thought to call the salesperson to confirm if I could sell tomorrow and apply for T+0 to offset the payment, which would mean I wouldn’t have to add extra funds. However, I called from 3 PM until the office closed at 4 PM, and could not get through.
The next day, I sold the existing holdings I intended to sell, while continuing to call the salesperson. Each time I was on hold for over 30 minutes, from 9 AM until 4 PM, and not once was I able to get through. Ironically, I kept receiving text messages stating that my settlement account balance was insufficient.
No time to answer calls but plenty of time to send texts?? Anyway, I sold my orders, and the system anticipated a refund of NT$240,000 on August 8. Since I couldn’t get through on the phone, the intelligent assistant was just a regular search engine and was unable to help with anything. I had no choice but to transfer money from another bank into the settlement account. After confirming that the balance was sufficient for the settlement, I left it alone.
This morning, I checked the balance again and found that a prior charge had been deducted, but the remaining balance was still enough, so I closed the app. Then, unexpectedly, I encountered an issue… At 10:50 AM, I missed a call from my investment advisor. At 10:52 AM, I immediately called back, but was still on hold. After waiting for 5 minutes, I hung up and discovered an official notice of the default settlement in my inbox, stating that I could call back or reply via email if I had any questions.
I had called for three days without being able to get through, and if I kept calling slowly, wouldn’t that be foolish? So I quickly took a screenshot of my account and the anticipated settlement amount and replied asking them to handle it. Five minutes later, I received a call.
Investment Advisor:
Me:
: Hello, sir, we received your email. What seems to be the problem?
: I just received a notice of default settlement, but I have checked several times, and the account balance is sufficient. Can you please re-confirm? The investment advisor seemed to be either checking the account or calling someone else to ask.
: Sir, I’ve just confirmed that your account has a hold, which caused the deduction to fail. A total of NT$400 was held. We will send you further information, and I must inform you that a default penalty of up to 7% may apply.
: …I was held for NT$400? I just confirmed the account balance this morning and found that a charge was deducted. I even recalculated to ensure the amount was sufficient! Moreover, you have no indication that a hold was placed! Now I’m facing a default settlement because of this! What should I do now?
: Because we have already reported this, it cannot be revoked at this point. We will notify you of further information later. 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. There was no indication of a hold, and I confirmed multiple times that the balance was sufficient for payment. Now, because of this, I am facing a default settlement, my credit will be affected, and I have to pay a 7% penalty. Is this reasonable?
Since yesterday, your phone lines have been completely unreachable, and I couldn’t even confirm anything. I understand there has been a significant drop in stock prices recently, and many exchanges have been overwhelmed, but I have been calling since morning until your office closed, each time waiting for over 30 minutes, yet I was never able to get through. Isn’t that odd? I want to file a complaint; please tell me how to proceed. Also, please provide me with a phone number where I can definitely get in touch.
: If you are unable to reach us multiple times, you can contact the customer service center. Complaints must also be directed to customer service. I can only continue to report this issue, and further information will be notified later.
: Your answering machine always tells me to call the customer service line for system-related issues, and to continue waiting online for issues related to my account and funds. How would anyone know that customer service can help? Is it my problem or your company’s problem? I have been calling all day without success; isn’t that strange?
: Uh…
: I’m filing a complaint immediately. Then I hung up and called customer service to file a complaint and requested a response within the day. By the way! I also topped up NT$3,000 in my account to see if a miracle would happen—how naive. By 4 PM, my account was charged for that NT$400 settlement fee, and the same person called again.
: Hello, sir, we have received your complaint. Let me explain: once reported, this cannot be revoked, and further information will be communicated via email or phone.
: Uh (angry to the point of not knowing what to say)
: … (Because I didn’t say anything, they eventually hung up) An hour later, a more senior investment advisor called to check in, but the basic content was the same; she only emphasized that although both companies are under the same system, they are different companies and they cannot know the reason for the deduction failure. A deduction failure must be reported immediately.
In any case, I have confirmed that I am facing a default settlement. I can’t access all my accounts now, and tomorrow I will have to continue calling to find out how to resolve this. I sincerely advise those who use the major brokerage series to run away; this company’s investment advisor phone lines are always unreachable, and when something goes wrong, they won’t help you or resolve anything.
I believe that even though you operate your own stocks, you should still seek help when issues arise. A brokerage that offers many apps but lacks any real support will never be my choice again.
Netizens’ suggestions to avoid default settlements:
Regarding the plight of this investor, some kind netizens provided six major suggestions:
1) Many people often say that investment advisors are not important, unnecessary, and not needed (this is often said about sales in many industries)—just give me the lowest fees.
2) Even after this incident, I see many people still asking for discounts and comparing fees, instead of trying to find their own advisor. In fact, for most people, a 10% difference in transaction fees over a month doesn’t make much of a financial impact.
3) The individual involved assumed they could switch from T+2 to T+0 to cover the settlement for just NT$400. I believe brokerages have their own operations and regulations.
4) The individual did not fully understand the account opening process and opened it online without designating an advisor. Therefore, they did not have a dedicated representative and started trading without knowing who to contact in case of issues. This was a hasty decision or a lack of due diligence on their part.
5) This individual claimed that using their debit card led to the bank’s funds being held, causing the brokerage to withhold insufficient funds. Does the brokerage know about this? They should simply deduct the available balance; blaming the brokerage is a bit hard to comprehend.
6) Next time, in a few years, remember to find an advisor. Don’t buy a car, insurance, or a house next year and then say that a certain advisor is not needed—just give me cheap and fast service.
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