Unauthorized Trading

An unauthorized trade occurs when a stockbroker or investment adviser purchases or sells a security in your account without your permission. The more trades in your account, the higher their commissions. Brokers must have investor authorization prior to making a trade. Failure to obtain this authorization can give rise to liability if a loss results.

An exception to this rule is if the trade is subsequently ratified or approved. It is vital that an investor report unauthorized trading when it occurs– even if an investment gain is the initial outcome. An investor will not be permitted to stand idly by as the unauthorized trade yields positive results, only to complain when losses accrue.

Detecting and Responding to Unauthorized Trading

It is imperative that you carefully review your account statement to detect unauthorized trading. If you see unauthorized trade or activity, question your broker on the discrepancy, and immediately lodge a complaint by phone and in writing to the firm’s compliance department. Timely reporting of unauthorized trading is important.