Unauthorized Trading
Unauthorized trading is a trade placed in a customer’s account without the customer’s prior consent and without written discretionary authority. Tracy Pride Stoneman represents investors in these claims in FINRA arbitration nationwide, from Westcliffe, Colorado.
By Tracy Pride Stoneman, securities arbitration attorney Updated
| What happened | Rule or law | How it is proved |
|---|---|---|
| A trade the customer did not approve before it was entered | FINRA Rule 3260 (no discretion without written authorization accepted by the firm); Rule 2010; Rule 2020 where the trade is concealed | Order-ticket time stamps against the phone log; the firm’s own recorded lines; no discretionary agreement on file |
| “Time and price” discretion stretched past its limit | Rule 3260(d)(1): oral time-and-price discretion on a specific order lasts only until the end of that business day | Trades executed on later days than the instruction |
| Confirmations treated as the customer’s consent | Silence after a confirmation is not authorization; firms argue ratification, panels weigh the customer’s sophistication | Complaint letters, calls to the branch, the firm’s complaint file under Rule 4513 |
| The firm ignores the complaint | Rule 4513 (customer complaint records); Rule 3110 | The complaint and the firm’s written response |
A FINRA panel can award compensatory damages (out-of-pocket losses or market-adjusted “well-managed account” damages), interest, costs, attorney’s fees where a statute or contract allows them, and punitive damages in egregious cases. Claims must be filed within six years of the events under FINRA Rule 12206, and shorter state statutes of limitation may also apply.
If any of this sounds like your account, the next step costs nothing: a free, honest evaluation. Tell me what happened or call (719) 783-0303.
Common questions
Unauthorized Trading: what clients ask
My broker said he had my verbal okay. Is that enough?
For each individual trade, prior approval is required. Ongoing discretion to trade without asking each time requires written authorization that the firm has accepted. A broker who trades on his own judgment without that authority is breaking the rules.
What if I did not complain right away?
Many investors only notice unauthorized trades later, or were told by the broker that it was handled. A delay can complicate a claim but does not automatically defeat it. Raise it in writing and get the account reviewed as soon as you can.
What should I do if I see a trade I did not approve?
Write to the firm, not just the broker, to dispute it, keep a copy, and save your statements and trade confirmations. Then have the account reviewed before deciding on next steps.
Your move
A free evaluation has no downside other than your time.
Tell me what happened. I will tell you honestly whether you have a case worth pursuing — and every way I can be paid, including contingency: nothing unless you recover.