Investment Fraud: Unauthorized Trading

Unauthorized trading, a form of broker misconduct that occurs when a broker makes a trade without the investor’s consent, can be a valid claim for securities arbitration. However, there is more than one way for unauthorized trading to be committed. In one way, the broker may believe that the transaction is suitable for their client but can’t or doesn’t contact the investor before making the trade. However, in other circumstances, the broker may make the trade and then try to convince the investor to consent to the trade — even though it’s after the fact, which the broker does not disclose. This second scenario is especially tricky because if the client then consents to the trade, the unauthorized trading may go unnoticed unless the client is careful to check the dates of transactions on their monthly statements.

The following suggestions will help you prevent unauthorized trading and determine if you have been a victim of unauthorized trading:

1. Take notes! This can be especially helpful in determining if you have been a victim of the second method of unauthorized trading described above. It is important to keep careful notes of all conversations between you and your broker. Notes should include dates, times, what was discussed and what your instructions were to your broker. These notes can be compared with monthly statements to determine if your broker conducted trades that were either unapproved or conducted before your approval was given. Remember, unauthorized trading is still fraud, even if you later consented to the trade, and should not go unchecked.

2. Check statements! You should always read your account statements, confirmations and anything else related to your investments in a timely fashion. Do not put off reviewing your statements and be sure to keep them for future reference. In the event that you need to file a securities arbitration claim, it is important that you have both your statements and your notes for your stock broker fraud lawyer to review.

3. Be clear! Always be abundantly clear of your wishes in communications to your stock broker. Repeat your instructions and be firm about your decisions. If you do not want your broker to execute a trade, say so clearly, distinctly and at least twice. Then record your decision in your notes as well as the number of times you expressed your instructions to your broker. Doing so will ensure that there is a clear understanding between you and your broker about the transaction being discussed, as well as help to prevent confusion in the event that you file a securities arbitration claim.

If you believe you have been the victim of unauthorized trading, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.