Unauthorized Trading

What Is Unauthorized Trading of Securities and Investments?

Unauthorized trading is simply the buying and selling of securities (such as stocks, equities, bonds, or mutual funds) without discussing with or disclosing the trades to the customer.

Generally, an investor can have two kinds of securities / investment accounts; non-discretionary and discretionary. In a typical non-discretionary account, the broker / financial advisor must consult with and obtain the consent of the customer prior to making any trades in the account. Unauthorized trading occurs when a broker / advisor makes trades in a non-discretionary account without the consent of the customer.

Brokers can also be found liable for unauthorized trading if they trade without authority in non-discretionary accounts while misrepresenting or omitting material facts. For example, the Virginia Securities Act, Va. Code § 13.1-522, prohibits in the sale of a security “by means of an untrue statement of a material fact or any omission to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading…”

Failing to disclose to a customer the fact that a broker and firm made a securities purchase or sale when they are required to do so is obviously an important a material fact, thereby potentially creating liability for the broker and firm.

Most other state securities acts are similar to Virginia in prohibiting misrepresentations and omissions in the sale of securities. If you believe your advisor has engaged in unauthorized trading resulting in losses, you should contact one of our attorneys as soon as possible.

The Act further makes it unlawful to sell a security while employing “any device, scheme or artifice to defraud.” Va. Code § 13.1-502. The Virginia Securities Act, along with most other state securities Acts, provide for a recovery of reasonable attorneys’ fees and interest in addition to a customer’s damages.

The failure to disclose and discuss trades may also form the basis for a breach of fiduciary duty claim against the advisor and his/her firm. The fiduciary responsibilities of a broker to his/her customer include: “… (3) the duty to inform the customer of the risks involved in purchasing or selling a particular security; …(6) the duty to transact business only after receiving prior authorization from the customer.” Lieb v. Merrill Lynch, Pierce, Fenner and Smith, 461 F.Supp. 951, 953 (E.D.Mich. 1978).

Unauthorized trading is considered fraudulent activity by securities industry rules. Pursuant to FINRA Rule 3260, no member or representative may engage in discretionary transactions in a customer account without explicit written authorization to do so by the customer.

The attorneys at Greco & Greco have filed many FINRA arbitrations over the past 25 years involving a financial advisor’s unauthorized trading in customer investment accounts. If you believe that your broker / financial advisor or brokerage firm has engaged in unauthorized trading in your securities / investment account, please contact Scott Greco for a free attorney consultation.

Our Virginia securities fraud lawyers represent individuals from all states across the country and have decades of experience protecting the rights of customers, and holding securities firms responsible for the acts of their brokers.

Client Reviews

Greco & Greco represented me several years ago in a case in which my financial planner ignored my investment guidelines in making several very risky investments in my name. This individual was employed by a very large financial services corporation which refused to return my funds. I retained Greco...

J.W.

Very professional and compassionate representation by this firm. Communication was clear and concise. This firm has a high degree of integrity and knowledge of SEC law. Highly recommend.

C.A.

Very good attorney - client communication. Great legal representation. Satisfying results.

A.W.

Scott Greco was very professional, and honest. I highly recommend this firm. Scott Greco explained everything in a way I could understand, and I never left the office with unanswered questions. If I ever need any other legal representation Greco & Greco, P.C will be my only choice.

Anonymous | Hired Firm

W. Scott Greco represented me in my attempt to recover money lost in a ponzi scheme. He kindly and skillfully guided me through the process of submitting the required documentation of loss, provided sound legal advice regarding accepting arbitration, and kept me fully informed as the case moved...

Anonymous | Hired Firm

Contact Us

  1. 1 Free Attorney Consultation
  2. 2 Contingency Fees
  3. 3 85 Years Combined Experience
Fill out the contact form or call us at (877) 821-5550 to schedule your free attorney consultation.

Leave Us a Message