What to Do If You Suspect Your Broker Engaged in Unauthorized Trading
Under most circ*mstances, a broker or financial advisor cannot trade in your account without your permission. There are very limited exceptions to this rule. Unauthorized trading is a serious offense that can result in liability. In order to prove that your broker engaged in unauthorized trading, it is strongly recommended that you consult with an experienced attorney.
At Meyer Wilson, we represent clients who have suffered financial losses related to investment fraud and stockbroker misconduct. Our experienced attorneys will fight hard to hold brokerages and other financial institutions accountable for their wrongdoing while helping you recover your losses.
Did your broker or financial advisor trade in your account without your permission? Contact our office at (614) 532-4576 for a free consultation.
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When a Broker Can Make Transactions Without Your Permission
In most cases, a broker or financial advisor will be prohibited from making any trades or transactions within your account without your permission. One of the few exceptions to this rule is if you have a discretionary account.
A discretionary account gives the broker or financial advisor the ability to use their “discretion” in making trades (buying or selling securities) without your prior authorization. Discretionary accounts are somewhat rare and are required to be in writing. The customer agreement you sign will expressly state that the broker has the authorization to make trades without obtaining your permission.
Discretionary vs. Non-Discretionary Account
Because a discretionary account allows a broker or financial advisor to make transactions in a customer’s account without their express authorization, the Financial Industry Regulatory Authority (FINRA) imposes special supervisory requirements.
Additional supervisory requirements include reviewing all discretionary accounts at “frequent intervals.” Discretionary accounts may be more prone to inappropriate trading since they do not require client approval for transactions. Even though an account may be marked “discretionary,” all trades that the broker makes in the account still must be in the client’s best interests.
In non-discretionary accounts, a broker or financial advisor must obtain a client’s permission before making any transactions. Any buying or selling of securities without a client’s authority is considered unauthorized trading and is a direct violation of FINRA Rule 2010.
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614-532-4576Margin Calls
The other exception to the rule is if the broker or financial advisor was executing a margin call. If you have a margin account where you have borrowed money from your broker to buy a stock, the broker may be able to sell your securities without first obtaining your permission. The account must have fallen below a firm’s maintenance requirement in order for this exception to apply.
Buying investments on margin is risky and may be unsuitable for the average investor. It is vital that you understand all of the potential downfalls and risks of loss before agreeing to trade any investments on margin. However, if you do not have a margin account or a discretionary account, any trading in your account without your permission may be considered investment fraud.
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Suffered Losses Related to Unauthorized Trading? Contact Our Office.
If you have sustained losses related to unauthorized trading on your account, you might be entitled to compensation. Contact our office at (614) 532-4576 for a free, no-obligation consultation. We represent clients nationwide for investment and securities fraud claims. Call now to get started.
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The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from public sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise.
