BROKER MISCONDUCT: UNAUTHORIZED TRADING
Unauthorized Trading is pretty much just what it sounds like. It involves the purchase or sale of securities by a financial advisor or broker without the client's prior knowledge or authorization, in a non-discretionary account. Now, unauthorized trading in relation to arbitration surrounding broker misconduct can be a little more complicated, mostly due to issues of timing.
Client-Broker Relationship Regarding Unauthorized Trading
“The sooner you raise allegations of unauthorized trading in your account based on what you see in your slips or statements, the better chance you have of winning your arbitration case.”
Clients must bear in mind two things: 1) In contracting the services of a broker and broker-dealer firm, the client has set forth their investor profile, investment objectives, and risk tolerance level, which the basis upon which the broker should determine the overall financial strategy he or she chooses for the client as well as the individual financial products and granular transactions that constitute the ongoing execution of that strategy.
In other words, when you sign on with a broker, you authorize trading on your behalf by that broker in a global way.
He or she represents and executes your interests as an investor, and has a legal and fiduciary obligation to do so as long as the contract holds. 2) The trading confirmation slips and/or monthly statements you receive--if you receive them and do nothing--are basically considered tacit authorization of the trades executed therein.
Now, of course, not everyone reviews their monthly statements (they should!); and, certainly, if your broker really messes you up, you can challenge the legitimacy of that tacit authorization through financial arbitration and so on.
But the rule of thumb here is: the sooner you raise allegations of unauthorized trading in your account based on what you see in your slips or statements, the better chance you have of winning your arbitration case. The more distant those acts of unauthorized trading become, the less traction you'll have to fight them.
How Investors Can Protect Against Unauthorized Trading
The best way to protect yourself against unauthorized trading in your investment account is to review your monthly statements, like clockwork.
Do it.
Because not only is reviewing your statements an effective safeguard against unauthorized trading, it's an early warning system for all kinds of investment mayhem, including other very common forms of broker misconduct like unsuitability and churning.
If you believe you have already been the victim of unauthorized trading in your account, act immediately. As we mentioned above, timing is of the essence when it comes to winning arbitration over unauthorized trading.
PA & NJ Investor Fraud Attorneys
Our securities attorneys have over a decade of experience helping retail investors recover losses from stock brokers and national brokerage firms. We understand complex financial products and appreciate how stressful losing your wealth to an unscrupulous or negligent advisor can be.
If you or anyone you know has been the victim of investment fraud or broker misconduct, please contact us immediately for a free consultation at 1-855-462-3330 or by using our online contact form.
