Arjun contacted his sharebrokers to transfer shares owned by his trust to his personal name. The sharebrokers followed Arjun’s instructions, but did not open a broking account for him at the same time.
On 11 February 2020, worried about the effects of Covid-19, Arjun decided to sell some shares. The sharebrokers said they would need to open a broking account for Arjun. The broking account was opened the following day, but the sharebrokers did not tell Arjun until 20 February 2020. Arjun discussed selling the shares but, during the call, Arjun changed his mind and said that he did not want to sell the shares.
On 17 March 2020 Arjun contacted the sharebrokers saying that he wanted to sell the shares for exactly $4.90, no more, no less. The sharebrokers misunderstood Arjun’s instructions and sold the shares that day for $5.
Arjun complained that:
- the sharebrokers failed to set up the broking account when the shares were transferred into his name, delaying the sale of the shares
- the sharebrokers had failed to follow his instructions to sell the shares for exactly $4.90.
The sharebrokers apologised for the delay in opening the broking account for Arjun and offered compensation of $280, being the difference in the share price between 11 and 20 February 2020.
Arjun rejected the offer, because it did not take into account the sharebrokers’ failure to follow his instructions to sell the shares for exactly $4.90. Arjun complained to FSCL.
Arjun complained that the sharebrokers failed to follow his instructions when selling the shares. Arjun wanted the sharebrokers to sell the shares for exactly $4.90. This was the price he had originally paid for the shares and he wanted to get back exactly the amount he had invested.
If the sharebrokers had followed his instructions, the shares would not have been sold, because the share price did not get as low as $4.90. If Arjun had not sold the shares, he would probably still have them. The shares were now worth between $7 and $8.
Arjun also said that he did not sell the shares on 20 February 2020 because, due to previous dealings, he did not have confidence that the person he was speaking to would be able to carry out the transaction successfully. Arjun considered the sharebrokers should compensate him for the difference in the share price from 11 February until 17 March.
The sharebrokers said that they had not understood that Arjun wanted to sell the shares for exactly $4.90. They thought Arjun would be happy that the shares had sold for 10 cents more than his minimum. In any event their system does not allow them to sell shares at an exact price.
The sharebrokers were unaware that Arjun did not have confidence in their staff member, said it was his decision not to proceed with the sale on 20 February, and they would not be increasing the settlement offer.
We thought that the $280 offered to compensate Arjun for the share price difference between 11 February and 20 February was a reasonable settlement offer. We did not think the sharebrokers were obliged to increase the offer to include the 20 February to 17 March period. The sharebrokers did not know that Arjun did not trust the staff member concerned so had no opportunity to assign someone else to manage the transfer.
We accepted that Arjun told the sharebrokers to sell the shares at $4.90, no more no less. It was our view that the sharebrokers should have told Arjun that it was not possible to sell the shares for an exact price and that he could either sell the shares at a market price, or set a price that he would not sell below.
If Arjun had this information, it was most likely that he would have instructed his sharebrokers to sell for an amount more than $4.90. This would have achieved his goal of recovering the amount he paid for the shares and opened the possibility of earning a profit. We could not understand why Arjun would have objected to this option.
Arjun reluctantly accepted our view that $280 was a reasonable settlement offer and the complaint was resolved on this basis.
Insights for participants
Your clients may not understand the way systems work. It is important to listen carefully, communicate clearly, and clarify misunderstandings early.