On June 3, 2024, we saw an unprecedented thing: the New York Stock Exchange (NYSE) experienced a technical problem affecting Berkshire Hathaway Class A (BRK.A) shares. During this incident, the price of these shares, normally trading at over $600,000, dropped sharply to $185 on some broker systems. This error caused many investors to issue buy orders upon seeing the apparent drop, but the trades were executed at the actual price or even higher because of the volume of buying intent once the glitch was fixed. This was partly spurred on by Social Networks in which notice of the glitch was given and people jumped in en masse to buy.
This issue has caused major problems. We have encountered affected individuals who wanted to buy about a dozen shares with a financial net worth that was not even enough for one share of Class A at its actual exchange rate (over $600,000). When the operation was executed, they have gone on to have shares for several million dollars but a debt also of several million, since they did not have sufficient funds .
These types of events raise serious concerns about market integrity and investor protection. Legally, transactions that occur due to technical errors may be questionable. Investors who purchased shares at incorrect prices due to a technical failure have a strong basis to argue that these transactions should be rescinded. The SEC (Securities and Exchange Commission) and other market regulators have rules that allow for the rescission of transactions in exceptional circumstances such as these to protect fairness and market transparency.
In fact, these purchases were made contrary to European law. It is essential that affected investors immediately contact their lawyers to file a complaint. Such brokers cannot allow these transactions as they could cause a supreme risk in the market. Prompt action can improve the chances of favorably resolving these disputes.
This incident highlights the need for robust mechanisms in trading platforms to prevent such failures and protect investors from unfair losses due to technical errors. Trades executed under these terms clearly violate the principles of a fair and transparent market, and should be reviewed and reversed where necessary.
At Navas & Cusí we are financial lawyers, and we are already dealing with these issues to solve the problem suffered by our clients in this problematic.
