Do you suspect that your broker or advisor make unauthorized trades in your account?

Your broker cannot sell your securities without getting permission from you. A financial advisor needs the proper authorization to execute any transaction on your brokerage account. Whether it is buying a stock, selling securities, or moving money around, unauthorized trading is a very serious legal violation.

That being said, while the proper authorization must always be obtained, a broker does not always need to obtain express permission for every individual transaction. In this article, our FINRA arbitration attorneys highlight the two scenarios in which a broker could sell your stocks without getting explicit permission from you.

Have you suffered losses because of unauthorized trading?

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Do You Have a Discretionary Account or a Non Discretionary Account?

One of the most important things that investors need to know is the difference between a discretionary account and a non discretionary account. Do you know what type of brokerage you currently have? If you are not sure, you are certainly not alone. Though, you need to find out the answer immediately. This is very important information.

If you have a discretionary account, it means that you have signed a customer agreement that gives your broker authorization to conduct trades without notifying you or receiving your permission. With this type of brokerage account, your financial advisor has the general authority to buy and sell stocks on your behalf.

This is not to say that your broker can do whatever they want. Your broker must stick within the parameters that you set. They must make trades that are suitable for you, that comply with your risk tolerance, and that further your overall investment objectives. If they fail to do so, and you sustain damages as a result, your broker could be held legally liable for your losses. Still, with a discretionary trading account, your broker can sell an individual stock without asking you.

Was Your Broker Making a Margin Call?

The second scenario in which a broker can sell stocks without your permission occurs when they are making a margin call. Buying a stock on ‘margin’ means that you borrowed from your broker to make the transaction. Under securities industry regulations, and the internal policies of individual brokerage firms, investors must meet the minimum maintenance margin threshold at all times.

If your equity in a position falls below the required amount, then your brokerage firm has the right to sell your securities. If you are purchasing stock on margin, it is imperative that you have an in-depth understanding of your brokerage firm’s margin agreement. You do not want to be caught by surprise. Make sure that you understand exactly what will happen in every situation. Remember, buying on margin is risky: it is not suitable for all investors.

Get Help From a Broker Fraud Lawyer Today

At Sonn Law Group, our securities fraud lawyers are strong advocates for investors throughout the United States. We have deep experience handling claims involving unauthorized transactions. If you sustained substantial losses because your broker sold your stocks without your permission, we can help. For a free consultation, please contact our law office today.

Sonn Law Group is investigating claims regarding Joel Eziekel Blum (CRD #4905379, Goshen, New York). Blum recently submitted an AWC in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for 20 days. See FINRA Case #2014040186601. Blum was associated with Merrill Lynch from May 2008 until his termination in February 2014. Blum has been associated with Ameriprise Financial Services, Inc., since February 2014. The Form U-5 filed by Merrill Lynch to terminate Blum's registration states that he was discharged for "conduct including failure to contact clients in advance of entering orders in non-discretionary accounts and mismarking order tickets as unsolicited." FINRA found that Blum executed discretionary transactions in customer accounts without written authorization to do so. In addition, Blum mismarked order tickets in connection with these transactions, inaccurately indicating that the trades were unsolicited, according to FINRA. In entering into the AWC, Blum neither admitted or denied FINRA's findings. Pursuant to FINRA Rules, member firms are responsible for supervising a broker's activities during the time the broker is registered with the firm. Therefore, Ameriprise or Merrill Lynch may be liable for investment or other losses suffered by Blum's customers. If you were a client of Ameriprise, Merrill Lynch, or Blum, and have suffered investment losses or financial irregularities, please contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our "contact form."
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