Unauthorized trading occurs when a trading account is non-discretionary (that is the broker is not provided with authority to execute trades on his/her own) and the broker places a trade without the customer’s authority. FINRA has specific rules relating to unauthorized trading or misuse of a customer’s funds. Additionally, most brokerage firms have specific policies forbidding such behavior.
There are certain exceptions to this rule. For example, it if a customer has a margin account and the value of the account falls below the brokerage firm’s requirements, the broker may be able to sell the customer’s securities without consulting the customer beforehand.
If you are the victim of unauthorized trading immediately contact the attorneys at Mathews Giberson LLP to learn more about your rights.