like any business, if you owe them money,,they;ll sell your account to a collection agency an collect the money..they can put a lien in your bank account, house or job if you owe them money and call you everyday to demand payment. and its usually small amount and you can't short 10K with 2000 shares at 5 dollars.. you can max. short maybe $5000 or 1000 shares so you would owe only $10,000 most stocks don't gap up 400% overnight..only penny stocks and you can't short penny stocks. or anything under $2 if you have money, than you will pay.
They can only put liens on your assets and garnish wages only by court order. Think about it "businesstaxes". Can I just put a lien on your house? Who determines who broke a contract? A judge. You both have to go in front of a judge and he/she decides. This takes time and expense. About the collection phone calls, depending on the state, in some states, they cannot phone you after you write them a letter demanding them not to call. Until they receive the letter, they can phone you. But send a registered letter saying to communicate only by snail mail.
+1 each case is different. broker is not stupid and will not pursue the matter if it is about pennies (read few Ks). that's why for instance IB has such a rigid risk management policy and for illiquid/volatile stuff they simply margin 100%. it is likely though that your credit score will get a hit!!! this is why you may consider to make them whole after all - or be smart and make a deal...
You should not doubt, because you will get sued for 20k and quite quickly as plenty of lawyers would take that case, let alone the broker's in house counsel.
even though they may not pursue beyond writing letters I would not be concerned about your credit score. your credit will become nonexistent.. margin at 100% on a short sale protects fully only if the stock does not go up by more than 100 %. the original question is idiotic/hypothetical because stocks don't go up 4X from the previous close. if you think differently come up with a list.
.... well im guesssing most of you, who have signed the options contract have never read it ... so how about you go ahead and read what your signing. You in most cases arent even allowed to sue your own broker...think of a broker like a casino ... the house always wins... they have more capital than you do .. make sense?
no. anytime you fight a large organization they have more assets than you. that is why lawyers take your case on a % basis.
Whatever contract says that you cannot sue them, that clause is unlawful..even if it's in the contract. They do not have the right to say that. Having said that, those contracts from the brokers are strong, they will probably win, but my point was that they cannot suddenly put liens and garnish wages so quickly.