Archive for the ‘Unauthorized Trading’ Category

Just What You Want to Hear

Monday, June 8th, 2009


The Securities and Exchange Commission (SEC) has filed a civil injunctive action against Mark R. Hamlin and two companies he owned, Kingdom First Trading, LLC, and Kingdom First Corp, for fraudulently selling approximately $2 million in unregistered securities.


Unauthorized Trading (Part 3)

Friday, November 21st, 2008

How should you respond when your broker makes a trade without your permission?  There is only one thing to do.  You must report the unauthorized trade immediately to the broker’s branch manager and to the firm’s compliance department, and you must do so in writing.

Be very careful; the broker will ask you to delay reporting the trade.  He will say something like, “Let’s give it a day,” or “Let’s give it a week,” asking you to wait and see whether the unauthorized trade will become profitable.  The broker may even beg you not to report the unauthorized trade, asking you to think of his family.  But any delay in reporting the trade will look like a ratification of the trade.  Do not let the broker convince you to wait. (more…)

Unauthorized Trading (Part 2)

Wednesday, November 19th, 2008

Unauthorized trading is rampant.  If a broker gets caught doing it, even once, he’ll likely be fired and maybe barred from the securities industry.  So, why do they get away with it?  Two reasons. (more…)

Unauthorized Trading (Part 1)

Sunday, November 16th, 2008

With the markets in the tank, and brokers desperate to meet their production targets, expect to see a rise in unauthorized trading.  ‘Unauthorized trading’ is the term for what happens when your broker buys or sells a security in your account without first getting your permission.  It is a violation of industry rules.  If it happens to you, you have a right to recover from the brokerage firm.  In Part 1 of this multi-part article, we’ll address why unauthorized trading is so prevalent and why we can expect to see more of it in the near future. (more…)

Picking on the Inexperienced

Tuesday, October 14th, 2008

Scamsters don’t have just one target audience for their schemes.  They are looking for anyone who might fall.  This time it was the elderly with little investment experience.


Smaller Wall Street Bonuses Spells Trouble for Investors

Saturday, November 10th, 2007

The news in the financial press is that bonuses on Wall Street will be lower this year.  Pay attention, because their pain will soon be your pain.  Lower pay for brokers means trouble for investors.  Like many Americans, brokers often live at the very limit of their financial means, leveraged to the hilt.  That lifestyle costs a certain amount.  When his income declines, the broker’s first choice is rarely to cut back on his expensive lifestyle.  More often he chooses to find ways to replace the income he has lost.  That’s where you come in.     

With the market BASE jumping from its highs of last month, many investors will be in no mood to ride along.  When the broker calls with the idea to buy more stock at bargain basement prices, the customer is likely to say ‘No.”  If that were the end of the story, all would be well for the retail investor.  But “No” often does not register with a broker whose mortgage payment is due.  We will therefore see a rise in unauthorized trading.  Your broker will buy things without getting your permission first.   

Be ready to take immediate action.  Complain immediately not only to your broker’s branch manager, but also to the firm’s compliance department.  Do it in writing and keep a copy.   

Your broker will ask you not to.  He may say that he’ll cover you in the event of any losses (an illegal promise).  Of course, he does not believe that there’ll be a loss, so he makes that promise without any thought that he’ll have to keep it.  He may even beg.  Over the years you may have come to think of him as a friend.  You’ve told him about your family, and he’s told you about his.  He may ask you to think about his family and what a complaint to his boss will mean for them.  He’s a salesman.  He’ll likely convince you. 

Let me describe for you what will happen if you follow his advice rather than mine.   Keep in mind, this is not what might happen.  This is what will happen.   

The problem will come in the arbitration action you file after the stock tanks and the broker does not make good on his promise to cover your losses.  The broker will deny ever having the conversation in which he begged you not to tell and promised to cover your losses.  He’ll claim that you gave prior permission for the trade.  You’ll be stuck in a swearing contest.   On cross-examination the firm’s lawyer will ask

“If the purchase was unauthorized, why didn’t complain about it?”   “He begged me not to and promised to cover any losses,” you’ll reply.  “Really?” the defense attorney will say.  “Do you have anything in writing to prove that claim?”  “No,” you’ll admit, remembering that you read this post and wishing that you’d followed my advice. Let’s assess who is likely to win that swearing contest.  Remember that, by rule, one of the three arbitrators deciding your case will currently be working in the securities industry.  You gave up your Constitutional right to a jury trial when you signed the paperwork opening your brokerage account.  The very arbitration system into which you’ve been forced is owned and operated by the securities industry.   I don’t know what you look like, but I know your broker is a salesman and is a specialist at establishing credibility.  He convinced you to do something against your interest.  Do you think he can convince two of three arbitrators that he is telling the truth?   Bottom line, if you do not complain immediately above the broker’s head and in writing the broker will use your act of mercy against you.  Don’t be surprised.  His very livelihood is at stake.  He would no sooner admit to what he did than he would stick his head in a lion’s mouth.  The results would be the same.Complain immediately, in writing, to the branch manager and the compliance department.