Unauthorized Trades

Most brokerage accounts are “non-discretionary.” That is, the broker does not have discretion to buy or sell securities in the account without the customer’s prior authorization. If a broker buys or sells an investment in a customer’s non-discretionary account without first obtaining authorization from the customer, that is an unauthorized trade. Regardless of the broker’s motives — even if he (or she) sincerely believes it is in his (or her) customer’s best interest — it is a violation of industry rules and the law to make an unauthorized trade in a customer’s account.

There is a limited exception to the general rule prohibiting unauthorized trades. A customer can give his broker discretion as to the time and/or price at which a particular trade will be executed. For example, a customer can instruct his (or her) broker to purchase or sell a specific security and then leave it to his (or her) broker to determine the best time and price at which to execute the trade. Importantly, however, such “time and price discretion” must be in writing, and it will only remain in effect until end of business that same day.

If your broker made unauthorized trades in your account, contact Jacobson Law P.A. to discuss the specific facts of your case. You may have a claim and could be entitled to recover damages.