Most investors do not have the time or expertise to do the research in picking the right stocks, bonds, or ETFs for their portfolio. These investors will typically entrust a financial advisor or broker to help make financial decisions for them. When a broker makes transactions on their clients’ account without permission or authorization, the broker can be charged with unauthorized trading.
A broker will consult with their clients and make suggestions on the best course of action that will meet their client’s financial goals. Yet, no strategies or transactions can take place unless the clients give their approval. If a client believes their broker implemented unauthorized strategies or transactions, then there are several things brokerage clients can do. First, clients can speak to their broker to get an explanation. If this is unsatisfactory, then the clients can speak to the manager or the compliance office of the brokerage. If this is still unsatisfactory, then the clients can take their complaints to the Financial Industry Regulatory Authority or the Security and Exchange Commission.
FINRA and the SEC have several rules against unauthorized trading that can result in heavy financial penalties for the broker and their brokerage firm. In severe cases, a broker and members of their brokerage firm can be sentenced to prison. Unauthorized trading typically isn’t discovered until months after the original transaction. Therefore, it’s important for clients to seek the help of an attorney who understands trading and investing regulations. An attorney can help the clients understand the scope of the unauthorized trading activity and provide legal remedies that address this issue.
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