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Securities Fraud Help Center - Unauthorized Trades

Did You Know?

There are almost 5 million dog bites per year. About 800,000 victims per year require medical treatment. 1,000 dog bite victims per day are seen in hospital emergency rooms

A broker is not permitted to make trades on your behalf without your prior authorization for each transaction. A signed written contract must be signed by the customer granting permission for the firm to make trades for the customer without first obtaining the customer's approval. Absent this type of arrangement a broker is required to obtain the customer's permission on each transaction. Without such authorization an account is considered "non-discretionary". Some brokers have been known to execute trades without the consent of the client.

Unauthorized trading constitutes a breach of the broker's fiduciary duty and a violation of your rights. The unauthorized trades can be voided and resulting losses can be recovered from your broker. If you lose money as a result of such an unauthorized trade you have a claim against the broker and his firm for the loss.

NASD Rule 2310-2

NASD Rule 2310-2 defines Unauthorized Trading as "[causing the execution of transactions which are unauthorized by customers or the sending of confirmations in order to cause customers to accept transactions not actually agreed upon."]

Many courts have held that once the customer receives the confirmation and statement of the unauthorized trade and remains silent, the customer is deemed to have ratified the unauthorized and is therefore precluded from recovery. Courts will not allow a customer to "watch the market" before bringing a claim.

If an unauthorized trade takes place in you account, you must immediately bring this transaction to the attention of the brokerage firm. Unauthorized Trading can result in claims for rescission, breach of contract, or fraud, depending on the facts. If you have lost money due to trades that you did not authorize on your account, your broker and your broker's firm may be liable.

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Last updated: December 10, 2007