Brokerages are exposed to a lot less of it than e.g. credit cards, because it isn't baked into the model in the same way (and, indeed, the opposite is baked into the model), but it has been known to happen. See the Interactive Brokers 2018 annual report:
Over an extended period in 2018, a small number of the Company’s brokerage customers had taken relatively
large positions in a security listed on a major U.S. exchange. The Company extended margin loans against the
security at a conservatively high collateral requirement. In December 2018, within a very short timeframe, this
security lost a substantial amount of its value. The customer accounts were well margined and at December 31,
2018 they had incurred losses but had not fallen into any deficits. Margin shortfalls were met in a timely manner
by delivery of additional shares by the customers. Subsequent price declines in the stock have caused these
accounts to fall into deficits, despite the Company’s efforts to liquidate the customers’ positions. Through
February 27, 2019, the Company has recognized an aggregate loss of approximately $47 million. The maximum
aggregate loss, which would occur if the securities’ prices all fell to zero and none of the debts were collected,
would be approximately $59 million. The Company is currently evaluating pursuing the collection of the debts.
"Whose money did IKBR lose?" IKBR's. (Mechanically, it's a hit to their shareholder equity, which you can verify with toy math if you like playing balance sheet games.)
Brokerages are exposed to a lot less of it than e.g. credit cards, because it isn't baked into the model in the same way (and, indeed, the opposite is baked into the model), but it has been known to happen. See the Interactive Brokers 2018 annual report:
Over an extended period in 2018, a small number of the Company’s brokerage customers had taken relatively large positions in a security listed on a major U.S. exchange. The Company extended margin loans against the security at a conservatively high collateral requirement. In December 2018, within a very short timeframe, this security lost a substantial amount of its value. The customer accounts were well margined and at December 31, 2018 they had incurred losses but had not fallen into any deficits. Margin shortfalls were met in a timely manner by delivery of additional shares by the customers. Subsequent price declines in the stock have caused these accounts to fall into deficits, despite the Company’s efforts to liquidate the customers’ positions. Through February 27, 2019, the Company has recognized an aggregate loss of approximately $47 million. The maximum aggregate loss, which would occur if the securities’ prices all fell to zero and none of the debts were collected, would be approximately $59 million. The Company is currently evaluating pursuing the collection of the debts.
"Whose money did IKBR lose?" IKBR's. (Mechanically, it's a hit to their shareholder equity, which you can verify with toy math if you like playing balance sheet games.)
"What stock was that?" A Chinese firm with no operations which reverse-merged with a NASDAQ-listed entity to do a pump-and-dump. https://www.bloomberg.com/news/articles/2019-04-29/china-fir... c.f. https://hindenburgresearch.com/yangtze-river-port-logistics-...