Investor Resource
Unauthorized Trading: Your Rights
If your broker made trades without your permission, you have legal recourse. Unauthorized trading is a serious FINRA violation.
What Is Unauthorized Trading?
Unauthorized trading occurs when a broker executes trades in your account without your prior knowledge and consent. Unless you have given your broker written discretionary authority over your account — which is rare for retail accounts — every single trade requires your approval before it is executed. A broker who buys or sells securities without your authorization has violated FINRA Rule 2010 and potentially committed fraud. It does not matter whether the trade was ultimately profitable; the violation is the lack of authorization itself.
Discretionary vs. Non-Discretionary Accounts
In a non-discretionary account (the standard arrangement for most retail investors), the broker must get your approval before making any trade. In a discretionary account, you have given the broker written authority to trade without calling you first. If you never signed a discretionary account agreement, your account is non-discretionary by default. Some brokers claim verbal authorization was given — which is why it is critical to review your trade confirmations carefully and promptly report any trades you did not authorize.
What to Do if You Discover Unauthorized Trades
Act quickly. Review your account statements and trade confirmations as soon as they arrive. If you see a trade you did not authorize, notify your broker and the firm's compliance department in writing immediately. This creates a paper trail and may trigger the firm's obligation to investigate. Do not assume the trade was a mistake that will sort itself out. Contact a securities attorney — unauthorized trading is a serious violation that can entitle you to full restitution of any losses, plus interest.
Frequently Asked Questions
What if I verbally told my broker to make trades at their discretion?
Verbal discretionary authority is not legally sufficient. FINRA rules require that discretionary authority be granted in writing. If your broker claims you gave verbal permission for trades, they have no legal defense — you can still bring an unauthorized trading claim.
Can I get my money back for unauthorized trades that made money?
If a trade was unauthorized, you are entitled to have it reversed regardless of whether it was profitable. However, as a practical matter, most investors focus their claims on unauthorized trades that caused losses. A securities attorney can advise on the best strategy for your specific situation.
What is 'churning' versus 'unauthorized trading'?
Unauthorized trading means the broker made trades without your permission. Churning means the broker made excessive trades — even if you authorized each one — primarily to generate commissions. Both are serious violations, and both can occur simultaneously in the same account.
Attorneys Who Handle These Cases
These attorneys have experience with unauthorized trading: your rights matters.
Walter J. Mathews
Walter J. Mathews, P.A.
Marc Fitapelli
MDF Law PLLC
Nicholas J. Guiliano
The Guiliano Law Group, P.C.