Unauthorized Securities Trading

Unauthorized trading on an investor’s account, which is also known as churning, usually entails some form of excessively trading securities for retaining large numbers of commissions at investor’s expense.  If a purchase or sale of any security is initiated by a broker on a non-discretionary account without the express consent of an investor, unauthorized trading has occurred. 

Determining Fraud Through Unauthorized Trading

In order for a broker to make a trade on your behalf, specific confirmation protocol must be followed, including notating all details of a transaction and reading them verbatim to the investor.  Following this, an order can be executed by the broker, however, immediately after the broker must call back and reconfirm all information regarding the sale or purchase as well as enter the trade information exactly into the firm’s internal records. Finally, most likely five business days later, a confirmation must be sent from the brokerage firm to an investor after an investment settles.  For the most part, brokerage firms contain clauses in new customer agreements that mandate disputes be resolved through arbitration.  In an authorized trading arbitration, investors must immediately file a claim following the trade in order to retain a favorable outcome in arbitration.  Other rules, such as NASD Rules of Fair Practice, may have been violated during an unauthorized trade, such as requiring written discretionary authority directly from an investor. 

Getting Legal Help

If your broker has engaged in trades against your wishes or without your prior consent, you should immediately consult with a securities fraud attorney to begin the unauthorized trading arbitration process.