Forced liquidation, sometimes called forced selling, occurs when a brokerage firm or lender sells securities or other assets in an investor’s account without the investor voluntarily initiating the sale.
Forced liquidations most commonly occur when:
- A margin account falls below applicable maintenance requirements;
- The collateral supporting a securities-backed line of credit declines;
- An investor fails to satisfy a margin or maintenance call;
- A brokerage firm increases its internal “house” margin requirements;
- A security becomes ineligible for margin or collateral purposes; or
- A lender demands repayment of a securities-backed loan.
The sale may occur during a rapidly declining market, potentially causing substantial realized losses, adverse tax consequences, and the loss of investments the customer intended to hold.
Not every forced liquidation creates a legal claim. Brokerage agreements frequently give firms broad authority to liquidate assets when margin or collateral requirements are not met. However, an investor may still have a claim when the underlying leveraged strategy was unsuitable, the risks were misrepresented, the firm failed to follow instructions, or the account was negligently handled or supervised.
An experienced investment fraud lawyer can review the account agreement, recommendations, communications, liquidation records, and resulting losses to determine whether actionable misconduct occurred.
Pursuing a FINRA Arbitration Claim
Most brokerage-account disputes are pursued through FINRA arbitration rather than traditional court litigation.
An experienced FINRA arbitration lawyer can investigate the recommendation to use leverage, review the margin or credit agreement, analyze the liquidation transactions, obtain relevant supervisory records, calculate damages, prepare the Statement of Claim, and represent the investor through discovery, mediation, settlement negotiations, and the arbitration hearing.
Potential damages may include:
- Realized investment losses;
- Excessive interest and fees;
- Losses caused by unsuitable leverage;
- Tax consequences attributable to the liquidation;
- Losses from securities sold unnecessarily;
- A remaining debit balance; and
- Other damages recoverable under applicable law.
The availability and measure of damages depend on the facts and law governing the particular claim.
Investors should act promptly because FINRA’s arbitration eligibility rule and separate limitation periods may restrict the time available to pursue recovery. Learn more about FINRA arbitration deadlines and statutes of limitation.
Cómo funciona la liquidación forzosa
Si se encuentra en una situación de liquidación forzosa, es probable que se deba a que no ha podido hacer frente a un ajuste de márgenes o no ha podido pagar las deudas.
Cuando esto ocurre, el corredor o la bolsa tomarán posesión de los bienes y los venderán para recuperar el dinero que se les debe.
En la mayoría de los casos, los activos se venden con pérdidas, que pueden ser importantes.
¿Puede emprender acciones legales tras una liquidación forzosa?
A forced liquidation by itself does not necessarily establish brokerage misconduct.
The central issue is often what occurred before and during the liquidation.
A potential claim may arise when the evidence shows:
- An unsuitable investment recommendation;
- An inappropriate recommendation to use margin or a credit line;
- Excessive concentration in volatile securities;
- Fraud or material misrepresentation;
- Failure to disclose leverage and liquidation risks;
- Unauthorized trading;
- Failure to follow the investor’s instructions;
- Negligent execution of liquidation transactions;
- Negligence or breach of fiduciary duty; or
- Brokerage-firm failure to supervise.
For example, a broker may recommend that a retired investor use a securities-backed loan to generate additional investment capital without adequately explaining that a market decline could force the sale of retirement assets.
A claim may also arise when an investor was told that a margin call deadline would be honored but the firm sold the securities earlier, depending on the account agreement, communications, and surrounding circumstances.
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¿Qué es el ajuste de márgenes?
Un ajuste de márgenes es una demanda de un corredor o bolsa para que un inversor deposite más dinero o valores en su cuenta.
Los ajustes de márgenes suelen realizarse cuando el valor de los valores de una cuenta cae por debajo de un determinado nivel, conocido como los requisitos de márgenes.
Si un inversor no satisface un requerimiento de margen dentro del periodo de gracia, el corredor o la bolsa tienen derecho a vender los valores de la cuenta para cubrir el déficit.
¿Puede un corredor liquidar la cuenta de un inversor sin previo aviso?
Algunos inversores aprendieron por las malas el verdadero significado de la "liquidación forzosa" cuando sus corredores vendieron sus valores sin mucho aviso para cumplir con los márgenes de garantía.
En la mayoría de los casos, los agentes de bolsa conceden a los inversores un periodo de gracia para cumplir con las peticiones de margen, y no están obligados a vender los valores de una cuenta sin previo aviso.
Puede haber casos en los que un agente de bolsa venda valores sin previo aviso (un "Blow-Out"), con lo que el inversor sufrirá una pérdida sustancial de su inversión; esto sólo suele hacerse en los casos más extremos, cuando se teme una caída inminente del mercado y el agente quiere proteger sus propios intereses.
Hemos oído a muchos inversores que, cuando se quejaron a sus respectivas empresas de corretaje, les dijeron que habían firmado contratos que permitían a las empresas de corretaje hacer exactamente lo que les habían hecho y que no podían recurrir.
Sin duda, se firmaron contratos con esas condiciones contractuales onerosas, pero eso no significa que los términos del contrato sean ejecutables.
What Should You Do Immediately After a Forced Liquidation?
You should act immediately after a forced liquidation by preserving records and demanding a clear “account close-out” explanation, because the timing and discretion behind the selloff often determine the size of the loss.
Start by requesting a written breakdown of what triggered the liquidation (maintenance call, house margin increase, SBLOC collateral threshold, or intraday risk control), the exact time stamps, and the prices and order types used. A margin account is a leveraged account; a house maintenance requirement is a broker policy; a close-out report is the proof that ties the policy to your trades.
Next, lock down your evidence: monthly statements, trade confirmations, margin/SBLOC agreements, account-opening documents, risk disclosures, and every email, text, or platform message from your advisor or the brokerage’s margin desk. If the liquidation was concentrated in a single security or options strategy, document your objectives, risk tolerance, and any instructions you gave that were ignored.
At the Law Offices of Robert Wayne Pearce, P.A., our lawyers review whether the account recommendation was unsuitable, the risks were misrepresented, or supervision failed under industry standards. Forced liquidation can be contract-permitted, but “permitted” is not the same as “proper” when the underlying recommendation or handling was flawed.
¿Puede emprender acciones legales tras una liquidación forzosa?
Si usted ha sido víctima de una liquidación forzosa, puede emprender acciones legales contra un corredor de bolsa por incumplimiento del deber fiduciario y otras causas de acción.
Es posible que no tenga recurso por la emisión de peticiones de márgenes y/o liquidaciones forzadas de todos o algunos de sus valores con poca o ninguna antelación, pero eso no significa que el agente de bolsa no haya hecho nada malo.
IMPORTANTE: La pregunta más importante que debe hacerse es: ¿qué ocurrió cuando su agente o asesor financiero le recomendó abrir la línea de crédito respaldada por valores y/o las cuentas de margen? Dependiendo de la situación que le llevó a abrir la línea de crédito respaldada por valores y/o las cuentas de margen, es posible que pueda emprender acciones legales para ayudar a recuperar sus pérdidas de inversión.
En algunos casos, la recomendación de abrir la cuenta puede haber sido inadecuada para usted.
En otras palabras, si su corredor o asesor financiero le recomendó abrir una cuenta que era demasiado arriesgada para usted dado su perfil de inversión, entonces pueden ser considerados responsables de las pérdidas en las que incurrió como resultado de la liquidación forzosa.
Suitability and Best-Interest Obligations
A recommendation to use margin or a securities-backed credit line should be evaluated in light of the investor’s financial circumstances and objectives.
Relevant factors may include:
- La edad;
- Income;
- Net worth;
- Necesidades de liquidez;
- Investment experience;
- Tax consequences;
- Time horizon;
- Risk tolerance;
- Dependence on portfolio income;
- Ability to satisfy a margin call; and
- Capacity to withstand a forced sale.
The firm’s discussion of FINRA’s Know Your Customer and suitability standards explains the obligations applicable to certain earlier recommendations.
For retail recommendations made on or after June 30, 2020, the SEC’s Regulation Best Interest generally requires a broker to act in the retail customer’s best interest and not place the broker’s or firm’s financial interests ahead of the customer’s interests.
Whether a particular recommendation violated an applicable standard depends on the investor’s profile, the risks disclosed, available alternatives, the broker’s compensation, and the evidence surrounding the recommendation.
Brokerage-Firm Supervisory Responsibilities
Brokerage firms have independent responsibilities to supervise leveraged accounts and their financial professionals.
Appropriate supervision may include:
- Reviewing recommendations to open margin accounts;
- Evaluating securities-backed lending strategies;
- Monitoring concentration and leverage;
- Reviewing customer risk profiles;
- Detecting unauthorized margin activity;
- Monitoring repeated margin calls;
- Reviewing communications about liquidation risk;
- Supervising recommendations to borrow against retirement assets;
- Responding to customer complaints;
- Reviewing exception reports; and
- Escalating accounts showing significant risk of forced liquidation.
A brokerage firm may face potential liability when inadequate supervision permits or contributes to misconduct that causes investor losses.
Investors can learn more about when they may be able to pursue a brokerage firm for investment losses.
Obtenga su consulta gratuita con un abogado que entiende las cuentas de línea de crédito y de margen
An experienced stockbroker fraud lawyer can review the complete sequence of events—not merely the final liquidation—to determine whether the broker or brokerage firm bears responsibility for the investor’s losses.
The firm generally handles qualifying investor-loss claims on a contingency-fee basis. Clients ordinarily do not pay an attorney’s fee unless compensation is recovered.
Call (866) 860-9572 for a free and confidential consultation.
