Unauthorized Trading

Unauthorized trading is a form of stockbroker fraud or misconduct. For every single transaction, you must give your broker permission to make the trade unless you have granted the broker discretion to trade your account in writing. If a broker has ever bought or sold a security without receiving your permission prior to the trade, the broker has engaged in unauthorized trading, which is fraud and broker misconduct. The only way in which a broker may exercise discretion over your account is by having signed discretionary papers which give your broker permission to trade your account without your authorization.

If your broker has engaged in any unauthorized activity, they have committed fraud. Often, unscrupulous brokers place transactions in customer accounts without authorization, and then call the client to explain what a great trade they have just made, or that there was no time to call because of the market, and seek to gain the client's "consent" after the fact.  This "after the fact" consent is prohibited. Another example of unauthorized trading is when you and your broker discuss and/or agree on an investment strategy, but the broker then purchases some or all of the securities or funds, without first gaining your consent for each purchase or for each security.  It does not matter whether the unauthorized trades were for gains or losses; the conduct is still illegal.

When you become aware of any unauthorized activity, you must do something about the issue. Either call the compliance officer of the firm to complain, or contact a securities fraud attorney to discuss your rights.