There was a guy who came on here one or two weeks ago talking about how he got margin called while he was en route to Cancun or Cabo (or whatever) without cell reception. The market gapped open, and he wasn't aware of his margin call until some 12 hours later or something. He came on here asking about what recourse he has. Okay, that guy is an idiot, and it's obviously his responsibility. But the story that's related in this case: someone was given a margin call, was given a certain amount of time to close or add funds (48 hrs), was coming up with the money (allegedly, at least), and was later told (after the fact) that the broker had sold the shares. This guy might be completely full of it, and the story may be far from what actually occurred, but based on the information contained in the article...how is this guy being a whiny bitch? If the story is really like what's described, seems like its a grey area, but there's a very real possibility the broker will have (at least some) legal responsibility (obviously, not in the guy's loss prior to the margin call, but in loss stemming from the liquidation, which wasn't made clear what that was). And even if they are deemed to not have any legal responsibility, there's clearly something very messed up, if not nefarious, with the broker - again, short of there being big pieces missing from the story. If they were my broker, and I found out they did this to another client, you better believe I'd be looking to go elsewhere. About the dumbasses part of what you said: I wasn't sure if what you meant was that you have issue with any/all trading on margin, or if you were just referring to the losers that then go complaining. I'm presuming it's not the first option. I'll just put out there, that I've been margin called a handful of times, and without exception, they were positions that were part of market neutral strategies and there wasn't any net directional exposure (i.e. at the time of the margin call, I was not in a loss despite one leg of a trade being margin called). Not everyone that has a margin call is losing, let alone a dumbass.
Way back in 2004 a long lost friend told me he had inside information about a 1990s software darling. Your post reminds me how stupid even people with great degrees like a MBA can be. He calls me "I heard such and such has a big contract with the Government coming up and might get bought out! The CFO told me so"! I was in to Darvas and O'Neill price point method so the stock price said BS! My friend spent over $1.50 million of his own money along with added funds from family and friends and anyone who listened. The Form 4s were showing the CEO and CFO dumping from $4 down to $.40. When I begged my friend to dump(at $3 down to $1) he said "The Insiders just need to diversify". Stock went BK costing him, his family and friends over $3 million. I see him promoting penny stocks all the time. He's currently working as head of Risk Management after blowing up his personal account over five times. Some people are gifted getting money thrown their way to manage.
Oversea, you make a valid point. When I have participated in mock trials, we are instructed to assume that the facts presented are accurate, so that logical arguments and debate can be made. If indeed the facts in that case you mentioned turn out to be as presented, that investor will very likely have a solid case against the broker in question. If a definitive timeline of 48 hours was given, and communication ensued from the investor that cash was being raised and would be deposited in time, then the deadline should not have been suddenly voided. By and large I have not had problems with brokers, but one experience pointed out to me that some of them are neither fully competent nor professional. Hopefully the percentage of such will remain minimal!
You did not mention "without margin". That's what you added later. So what he posted is possible without stocks needed to go negative.. The name "margin call" clearly indicates that it is a position on leverage.