STOCKBROKER PROBLEMS
Unauthorized Activity
Unauthorized activity occurs when your broker buys or sells a security in your account without your prior approval. Unless you have previously agreed that your broker has discretion to manage your account without seeking prior approval for each transaction, your broker must follow rules designed to assure that you, in fact, approved each transaction.
Those rules require the broker to make a notes of all the particulars of the trading activity in an account. After the order is executed, the broker must call you vack to reiterate the pertinent information, including that actual pric at which the security was brought or sold. On the next business day, the broker must match up the information on the order ticket with the details of the actual trade on the firm’s internal records. The firm must then send you a confirmation after the trade actually “settles.”
Unauthorized trading can occur for any number of reasons. It occurs most often in firms where there is a large incentive for the broker to meet his commission goals, or quotas. Some firms, for examples, have contests in which the give away expensive trips or other perquisites to the broker who brings in the most commissions for the year. In other instances, the broker may be experiencing personal financial difficulties and is unable to resist the temptation to generate extra income without your permission. Whatever the reason, it is just another form of theft!
As an investor, you may be expected to examine your mothly statements and all of your confirmations. If you think you are receiving too many confirmations, that is a good sign that unauthorized or excessive transactions are occurring and that your account is being “churned.” Do not think you are required to accept a trade that you think was placed based upon a misunderstanding. It is the broker’s responsibility to obtain clear permission to make a trade, and any doubt should be resolbed in your favor. If you believe your broker made an honest mistake, you should allow them to correct it, but be sure you receive a corrected confirmation. Check your monthly statements to be sure the proper transactions are reflected in your monthly statements.