[Exclusive] "Confusion" at Some NH Investment & Securities Branches Ahead of Nov. 9 Forced-Liquidation Relief

Collateral ratio maintenance requirement suspended for three months... announced a day late
Employee: "I received notice from the company and called customers"
Investor: "If I'm subject to forced liquidation, who will be responsible for the losses?"

The government has decided to introduce emergency market-stabilization measures starting November 9 to prevent, in principle, the spread of forced liquidations triggered by a sharp market downturn. However, investors have been embroiled in controversy after some NH Investment & Securities branches in Jeonnam and Gwangju reportedly told customers the measures would take effect a day later, on November 10. As the government has even announced emergency measures to reduce investor losses, the differing implementation dates at securities firms' branches have raised questions about the policy's effectiveness.

According to financial authorities, the government held a joint meeting of relevant agencies to review market conditions at the Seoul Government Complex on November 6. At the meeting, it decided to waive securities firms' obligation to maintain a 140% collateral ratio for credit-financed stock purchases for three months starting November 9.

The emergency measure is intended to break a vicious cycle in which forced liquidations further drive down share prices, as the market plunged amid concerns over regulations on artificial intelligence (AI) data centers and other factors following the U.S. midterm elections.

At the meeting, attended by Vice Prime Minister and Minister of Economy and Finance Lee Hyeong-il, Financial Services Commission Chairman Lee Eog-weon, Financial Supervisory Service Governor Lee Chan-jin, and Bank of Korea Senior Deputy Governor Kwon Min-su, among others, relevant authorities discussed ways to respond to heightened volatility in financial markets. They agreed to closely monitor excessive investor anxiety and imbalances in supply and demand, and to prepare additional stabilization measures should market volatility intensify further.

However, contrary to the government's policy, some NH Investment & Securities branches in Jeonnam and Gwangju reportedly told customers that the collateral-ratio relief would take effect on November 10, not November 9.

Investor A, who had been classified as a target for forced liquidation, strongly protested after receiving a phone call from an NH Investment & Securities employee about the matter that day.

According to a recording obtained by this newspaper, A challenged the employee, asking, "All the other securities firms say the measure will apply from November 9. Why did NH Investment & Securities decide on November 10 on its own?"

The employee replied, "I'm not someone with the authority to make that decision," adding, "I'll compare it with what the other securities firms are doing and get back to you on Monday (November 9)."

When A questioned the implementation date, saying they had also contacted other securities firms directly, the employee explained, "I also received notice from the company at around 4:45 p.m. and was just calling customers to inform them."

Asked why the company was applying the measure on a different date from the government's, the employee said, "The government provided guidance to implement the policy, and I think the company decided on its own how to implement it."

It is unclear whether this was an official decision by NH Investment & Securities headquarters or a communication mix-up at some branches. However, the substance of the recorded call suggests the employee was relaying information received from the company to customers, rather than acting on a personal judgment.

The problem is that this confusion may amount to more than a simple mistake over the date.

If forced liquidations proceed on November 9 based on the existing collateral ratio, some investors could have their shares sold without receiving the protection intended by the government's emergency measures.

A also vented frustration, saying, "I'm someone who could actually be directly affected and suffer losses. If I'm subject to a forced liquidation, I'll suddenly go from being someone who should benefit from the government's measures to someone harmed by them."

In credit-financed stock trading, investors borrow money from securities firms to buy shares. If share prices fall and the collateral ratio drops below a certain level, investors must provide additional collateral. If they fail to do so by the deadline, the securities firm may forcibly sell their shares through a forced liquidation.

During a sharp market downturn, in particular, forced-liquidation orders can add further selling pressure, exacerbating share-price declines and investor losses. Domestic semiconductor blue chips also plunged amid spreading concerns over regulation of AI data centers, as the Democratic Party effectively won a landslide in the U.S. midterm elections. On November 6 alone, Samsung Electronics closed down 4% and SK hynix fell 6.96%.

When market volatility rises in this way, forced liquidations can lock in investor losses while also creating additional downward pressure on share prices. The government's decision to temporarily waive the obligation to maintain the collateral ratio for credit-financed stock purchases is intended to ease this kind of cascading selling pressure.

Yet NH Investment & Securities has reportedly told customers at some branches that the measure would take effect a day later than the government announced, raising growing questions about whether the purpose of the emergency measures is being properly reflected.

Of course, the government's waiver of the collateral-ratio maintenance obligation is not understood to be a measure that requires all securities firms to suspend forced liquidations. Securities firms can decide whether to adjust collateral ratios and when to apply any changes based on their own risk-management standards.

However, whether a decision is permitted under regulations and whether it is appropriate from the perspective of investor protection are separate questions.

Reporting by this newspaper confirmed that, unlike NH Investment & Securities, many domestic securities firms had decided to apply the policy exempting investors from forced liquidation starting November 9, in line with the government's position.

If a securities firm announced that it would implement the measure a day late while the government was announcing emergency measures in response to a sharp market downturn, it is likely to face criticism for failing to thoroughly assess the impact of that decision on investors.

An official at a regional securities firm said, "As soon as the government confirmed that the waiver of the obligation to maintain the collateral ratio for credit-financed stock purchases would take effect on November 9, we set our internal policy to implement it as announced. If NH Investment & Securities unilaterally moves the implementation date to November 10, it will cause significant adverse effects not only by disrupting the securities market but also across the broader economic system. Investors will bear the full brunt of the resulting damage."

This content was produced with the assistance of AI translation services.