{"id":1780,"date":"2013-10-17T07:11:00","date_gmt":"2013-10-17T14:11:00","guid":{"rendered":"http:\/\/staging-prblog.paladinregistry.com\/blog\/?p=1780"},"modified":"2014-01-07T16:13:07","modified_gmt":"2014-01-08T00:13:07","slug":"what-is-unauthorized-discretionary-securities-trading-2","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/wall-street\/what-is-unauthorized-discretionary-securities-trading-2\/","title":{"rendered":"What is Unauthorized Discretionary Securities Trading?"},"content":{"rendered":"

\"unauthorized\"<\/a>Unauthorized trading<\/a> occurs when a broker buys, sells, or exchanges securities without proper authority from the investor.\u00a0 FINRA Rules 2510(b) and 2020 and NYSE Rule 408(a) prohibit a broker from making or exercising discretionary trading authority in a customer\u2019s account.\u00a0 A broker must always discuss all trades with the investor before executing them unless an investor has given the broker written, not oral, discretion to make trades in an account.<\/p>\n

The Securities and Exchange Commission (SEC) has found that unauthorized trading constitutes securities fraud under the Securities and Exchange Act of 1934 and Section 10b and rule 10b-5.\u00a0 The SEC has also issued an Investor Alert<\/a> to warn customers and brokerage firms of the common signs that can indicate unauthorized trading.\u00a0 Under the federal anti-fraud provision an investor must show either a material misrepresentation or omission of information that caused the securities transaction.\u00a0 Unauthorized trading has been found to be a material omission of information because no omission could be more material to an investor than the failure of the broker to inform the investor of purchases and sales in their account.<\/p>\n

Unfortunately, when a broker makes an unauthorized trade in a client\u2019s account many brokerage firms attempt to hold the investor responsible for the trading.\u00a0 The brokerage firm often claims that if the investor does not object to the trade immediately, the investor ratifies the trade when the investor receives confirmations and\/or monthly statements reflecting the transaction.\u00a0 However, it is clearly the broker\u2019s responsibility to obtain the client\u2019s permission for trading.\u00a0 A client\u2019s inaction after the trade is made cannot create the written authority that was required to engage in the transaction in the first place.<\/p>\n

Recently, the Financial Industry Regulatory Authority (FINRA) sanctioned George Winneberger (Winneberger) for unauthorized trading in a client\u2019s account.\u00a0 From January 1987, through October 2010, Winneberger was associated with Southwest Securities, Inc. (Southwest).\u00a0 In October 2010, Winneberger was permitted to resign from Southwest after admitting to using discretion in an account without written authorization.\u00a0 Thereafter, Winneberger has become a registered representative with Raymond, James & Associates, Inc.<\/p>\n

According to FINRA, a client of Winneberger\u2019s gave him oral authorization to exercise discretion in her securities trading accounts.\u00a0 Winneberger periodically discussed the status of the accounts with the client.\u00a0 However, the client never provided Winneberger with any written authorization to exercise discretion and the brokerage firm\u2019s compliance policy did not allow for the exercise of discretionary trades without written authorization.\u00a0 In total, FINRA alleged that approximately 650 trades were placed in the customer\u2019s accounts and a substantial number of the trades were placed through the use of discretion.<\/p>\n

By acting with discretion without written authorization or approval, FINRA found that Winneberger violated NASD Rules 2510 and FINRA Rule.\u00a0 As a sanction, FINRA suspended Winneberger for fifteen business days and imposed a $7,500 fine.<\/p>\n

If you believe that you were the victim of unauthorized trading, the attorneys at Gana LLP<\/a> can help you determine the type of account you own, whether the trade was authorized, and how to proceed against the brokerage firm.<\/p>\n","protected":false},"excerpt":{"rendered":"

Unauthorized trading occurs when a broker buys, sells, or exchanges securities without proper authority from the investor.\u00a0 FINRA Rules 2510(b) and 2020 and NYSE Rule 408(a) prohibit a broker from making or exercising discretionary trading authority in a customer\u2019s account.\u00a0 A broker must always discuss all trades with the investor before executing them unless an investor has given the broker written, not oral, discretion to make trades in an account.<\/p>\n","protected":false},"author":20,"featured_media":1776,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1780","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wall-street"],"yoast_head":"\nWhat is Unauthorized Discretionary Securities Trading?<\/title>\n<meta name=\"description\" content=\"A broker must always discuss securities trades with the investor before 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