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Unauthorized Trading (Part 3)

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 [...]

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.

However you respond to the broker’s plea for mercy, he will deny the unauthorized trade when you file an arbitration action against him and his firm.  Do not be surprised at this; his livelihood is on the line.  If you have delayed in reporting the trade, the broker will likely win in arbitration.

FINRA and the securities industry have stacked the odds against you in arbitration.  But you can win an unauthorized trading case, as long as you report the trade immediately in writing to the broker’s superiors.

 

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