With a few exceptions, your broker must obtain prior authorization for any trades he or she makes on your account.
This excludes the following situations:
- Your broker has discretionary trading authority (or de facto authority) to make trading decisions without your explicit permission.
- Margin accounts allow brokers to sell securities without explicit authorization for each individual trade.
Unless one of these conditions is met, your broker must obtain your explicit permission before making any trade on your account. In some cases, your broker may inform you of the trade after the transaction is complete in order to obtain authorization after the fact. This is not an acceptable practice, and even in cases in which you provide this authorization, you may still have grounds to seek redress.
Unauthorized trading can consist of either the purchase or sale of securities without your expressed prior consent. If you did not agree to give your broker discretionary authority-whether in your original agreement or an amendment to that agreement, or in the context of a margin account-your stockbroker has no legal authority to make trades on your behalf.
Brokers may engage in unauthorized trading for a variety of reasons, but it is most frequently motivated by a desire for personal gain over the interests of you, the investor. To protect yourself from this and many other types of securities fraud, it is important that you review all of your statements and confirmation notices from your account. This will not only help you understand your investments better, but it will help you detect fraudulent activity more quickly, so you can mitigate and recover your losses sooner.
If you or a loved one suspect you might have been the victim of unauthorized trading in your investment account, it is important that you seek advice as soon as possible from an experienced stockbroker fraud attorney. With us, your initial unauthorized trading claims consultation will be free, and if you have been the victim of unauthorized trading, we’ll fight to get your money back.