{"id":352710,"date":"2017-08-30T13:31:41","date_gmt":"2017-08-30T18:31:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/securities-law\/what-to-do-if-you-suspect-unauthorized-trading.html"},"modified":"2024-05-17T09:35:44","modified_gmt":"2024-05-17T14:35:44","slug":"what-to-do-if-you-suspect-unauthorized-trading","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/securities-law\/what-to-do-if-you-suspect-unauthorized-trading.html","title":{"rendered":"What to Do if You Suspect Unauthorized Trading"},"content":{"rendered":"\n
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What to Do if You Suspect Unauthorized Trading<\/h1>\n
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\n By Oni Harton, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Many investors trust financial advisors, brokers, and investment advisers to manage their finances. We expect these professionals to handle a client’s account with honesty. Unfortunately, broker misconduct continues, and securities fraud happens.<\/p>\r\n

Clients who experience financial losses not attributed to typical market fluctuations have options. The government empowers and encourages clients and the public to report brokers’ wrongdoing. This includes stockbroker fraud. This article will discuss unauthorized trading and how to report it.<\/p>\r\n

Unauthorized Trading<\/h2>\r\n

When you entrust your finances to a\u00a0financial advisor or broker<\/a>, your broker will explain the scope of their authority to act on your behalf. An advisor can suggest certain transactions or strategies. But a broker can’t execute a transaction without your permission or authority.<\/p>\r\n

If you select non-discretionary accounts, no one but you has authority over your money. Your broker can still make recommendations, but you have the final approval before they buy or sell assets. The broker must contact the investor before making trades in your account.<\/p>\r\n

Unauthorized Trading Defined<\/h3>\r\n

"Unauthorized trading" happens when a broker executes a trade without permission or authority. If your broker makes trades in your account that you did not approve, it’s unauthorized trading. A broker can’t trade without the investor’s authorization and then try to get confirmation after the fact.<\/p>\r\n

Unauthorized trading can happen with any security or financial product. There are exceptions to the unauthorized trading rule. For example, if you have a\u00a0margin account<\/a>, your broker can make discretionary trades on your behalf. They may not have to get a trade confirmation. Your broker may be able to make a trade without consulting you first when the account falls below the firm’s required limit.<\/p>\r\n

It’s a good idea to read your margin agreement carefully. Understanding the situations where your broker can trade without trading authorization is critical.<\/p>\r\n

Examples of Unauthorized Trading<\/h2>\r\n

Certain signs show that unauthorized trading is happening in your investment account. When reviewing your investment account statements, you may see red flags of unauthorized trading. This activity includes trades in your account that you did not approve, including the following:<\/p>\r\n