Unauthorized trading is the purchase or sale of securities in an investor account that is done without the investor's prior knowledge and authorization. This can occur with any security.
Generally speaking, your broker is required to get your permission to make any trade in your account. If your broker makes a trade without your permission and doesn’t have the authority to do so, you might have a claim against your broker for unauthorized trading.
Two Tips to Avoid Unauthorized Trading
Never Waive Your Permission to Trade
The securities arbitration attorneys at DKRPA.com highly recommend that investors do not waive the requirement to obtain investor approval to trade. If your broker doesn’t have permission to act with impunity, you can help avoid investment losses from trades that you do not understand.
If you choose to rely solely on a broker to make investments on your behalf, make sure the firm has correct information regarding your financial situation and investment objectives and that the firm and broker fully understand your limits on risk.
Monitor Your Account Regularly – And Often
It is important to check your securities account or accounts frequently, even if you’ve allowed your broker to act on your behalf. Make sure that the types of securities purchased and the strategies employed are consistent with your risk tolerance and investment objectives. If you have online access to your account, review the account at least weekly.
In most cases, unauthorized trading is discovered through reading trade confirmations and closely reviewing regular account statements. A daily check can go a long way toward preventing securities fraud.
Instances of Potential Unauthorized Trading
Below are a few examples of situations that might constitute unauthorized trading.
- Trades made without your express consent
- Trades made outside of the scope of your written consent
- Trades that might be considered “unsuitable” given your investor profile and risk tolerance
What Qualifies as Unauthorized Trading?
Unauthorized trading might occur through a clerical mistake, a broker’s misunderstanding, mistaken assumptions as to the investor’s goals, or through blatant fraud.
What qualifies as unauthorized trading comes down to one thing: whether the investor authorized the trade(s) at issue.
For more information, you can also consult the FINRA website.
Have you been a Victim of Unauthorized Trading?
If you suffered a loss from unauthorized trading in your securities account, you must act quickly, as you may have certain legal rights that require your immediate attention. As soon as you see trades that are unauthorized you should immediately bring that to the attention of your broker and his or her supervisor, rather than wait to see if the trade loses money. The failure to act promptly could hinder your ability to pursue an unauthorized trading claim.
Call a Securities Fraud Attorney Today
The securities arbitration lawyers at Dimond Kaplan & Rothstein represent investors throughout the United State and Latin America in claims involving unauthorized trading and other stockbroker misconduct. The attorneys at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.
Contact us to schedule an appointment or consultation today to review your rights and options.