Unauthorized Trading

Unauthorized trading means that your broker has been trading within your account(s) without asking your permission.

Even if a security was discussed between you and your broker in a general sense, a customer must give permission for the specific security, in the specific amount and on the specific day the order is placed (which must be contemporaneous with that discussion, not at a different time in the day because markets can move and firms must provide customers with the “best execution,” a term of art and rule in the industry. FINRA Rule 5310 requires your broker to seek “best execution” when trading in your accounts. This requires your broker to do their reasonable diligence in obtaining the best market for the security at issue, whether you are buying or selling the security.) If you notice trades in your account that you did not authorize it is likely that your broker engaged in unauthorized trading. A New York unauthorized trading law firm like Malecki Law can review your transactions at no cost.

Whether you have a discretionary account, or a nondiscretionary account impacts the type of control your broker has over your accounts. If you have a discretionary account, your broker has more control when trading. However, if you have a nondiscretionary account, your broker should ask for your express consent before executing a trade. If you notice trades that you did not give permission to make or ask to execute, this is an indication that your broker is engaging in unauthorized trading. A New York unauthorized trading attorney at Malecki Law will tell you about telltale signs of unauthorized trading in a free consultation. There are only a few exceptions when your broker has the ability to sell securities without your consent. If the value of your margin account falls below the firm’s requirements, if the account agreement allows for securities to be sold in order to collect money that has been borrowed, or if the account has a written discretionary trading authorization flagging the account for heightened supervisory review.

If you notice trades in your account that you did not authorize, it is likely that your broker engaged in unauthorized trading. An unauthorized trading lawyer in New York at Malecki Law can review your securities accounts to determine if you have been damaged due to this form of misconduct. Unauthorized trading is a violation of FINRA Rule 2010 and may also be considered securities fraud under SEC Rule 10b-5. By engaging in unauthorized trading, your broker can also be liable for other causes of action, such as a breach of fiduciary duty.

FINRA holds brokers accountable for engaging in unauthorized trading. For example, Charles Harper Bridgers, formerly associated with Wells Fargo Clearing Services, Inc., was reportedly suspended from the industry for three months and ordered to pay a fine in the amount of $10,000. FINRA found that Bridgers entered municipal-bond orders in a customer’s account, without specific consent to enter the order and without consent to exercise discretion within the account itself. Further, FINRA found that Bridgers falsified his notes to the firm, to make it seem as though he spoke with the client before entering the trades, which he in fact did not. This was likely an attempt to hide the unauthorized trades from the firm. Upon the client’s death, the firm determined these municipal-bond trades were not authorized by the client. Unfortunately, the concealed unauthorized trades were discovered too late for the client… It does not have to be too late for you.

When you have a brokerage account, you have the right to be well-informed about your investments. A New York securities law unauthorized trading law firm like Malecki Law has the experience to assess your case and hold your brokerage firm or registered investment advisor accountable for taking that control away from you and not following what was in your best interest.