A four-justice panel of the Supreme Court, with Justice Oh Kyeong-mi as the justice in charge, rejected appeals from both sides and upheld a lower court ruling that partially favored the National Pension Service, or NPS.
The court said employees responsible for processing the dividend could have foreseen that shares mistakenly credited to staff accounts might be offered and sold through the market.
It therefore found a sufficient causal link between the employees' negligence and the NPS's losses, holding Samsung Securities vicariously liable under the Civil Act.
That marked a departure from the lower courts, which held the brokerage directly liable for deficiencies in its systems and internal controls but rejected the NPS's separate claim of employer liability.
The Supreme Court said that part of the lower court's reasoning was incorrect but concluded that recognizing the additional basis for liability would not alter the damages or the company's share of responsibility.
The accident occurred on April 6, 2018, when a Samsung Securities employee mistakenly processed a cash dividend of 1,000 won per share as a distribution of 1,000 shares per share to 2,018 members of the company's employee stock ownership association.
The error credited 2.81 billion nonexistent shares, worth about 112 trillion won at the previous day's closing price and more than 30 times the brokerage's outstanding shares, to employee accounts.
Twenty-two employees submitted orders to sell 12.08 million shares over a 31-minute period, with trades for 5.01 million shares offered by 16 employees ultimately executed.
The wave of selling pushed Samsung Securities shares down as much as 11.68 percent to 35,150 won from the previous close of 39,800 won.
The NPS, which held about 11.23 million Samsung Securities shares before the accident, sold roughly 940,000 shares that day and 3.57 million shares through Sept. 28.
The pension agency sued Samsung Securities in 2019, seeking about 29.9 billion won for losses it said resulted from the price collapse.
The Seoul Central District Court ruled in August 2024 that Samsung Securities had failed to establish adequate procedures and risk controls for dividend processing and had been too slow to notify employees and block sell orders after discovering the error.
Relying on an expert assessment, the court limited recoverable losses to about 1.66 million shares sold between the accident and April 10, finding that the incident's direct effect on the share price had dissipated by the following trading day.
It calculated losses of about 3.86 billion won by comparing the estimated price that would have prevailed without the accident with the prices at which the NPS sold its shares.
The court then limited Samsung Securities' responsibility to 50 percent, citing the combination of an unintended processing error and individual wrongdoing by employees who sold the shares.
After deducting gains the NPS made by purchasing shares at depressed prices on the day of the accident, the compensation was set at 1.87 billion won plus interest.
The Seoul High Court upheld the award in January, prompting both sides to take the case to the Supreme Court.
The Financial Services Commission separately suspended Samsung Securities from taking on new equity-trading clients for six months and imposed a 144 million won fine in 2018 over failures in internal controls, emergency planning and the safe processing of electronic transactions.
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AJP Takeaways
The Supreme Court upheld a 1.87 billion won compensation award to the NPS over Samsung Securities' 2018 phantom-share accident.
Unlike the lower courts, the top court recognized the brokerage's vicarious liability for its dividend-processing employees' negligence.
Compensation covered losses from the first three trading days after the accident, with Samsung Securities' responsibility limited to 50 percent.
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