Call Now For a Free Consultation:
(614) 502-6165

Discretionary V. Non-discretionary

Consult with Our Legal Team
There is never a cost associated with a consultation
Common Questions
For The Advocacy You Deserve Contact Us Today!
We’ll respond and let you know the best way to proceed with your case.

What Is the Difference Between a Discretionary and Non-discretionary Account?

One of the first things our office ask about when we speak with a potential client about their investment account is if the account is non-discretionary or discretionary. Understandably, most investors don’t know how to answer that question. There are two main reasons for this.

First, too many brokers don’t explain the difference between non-discretionary and discretionary accounts when they are dealing with their customers.

Second, and most often, brokers treat non-discretionary accounts as if they were discretionary accounts, even though the broker doesn’t have authority from the customer to make trades on a discretionary basis.

A non-discretionary investment means that the broker has to contact you and get your permission before making any trades in your account. In a discretionary account, the broker is permitted to exercise their own discretion and make purchases or sales of securities without talking to you and getting your permission. Discretionary accounts are usually memorialized in your brokerage firm paperwork. 

In both types of accounts, a broker is required to make recommendations that are appropriate for you, taking into consideration your unique circumstances, goals, and your tolerance for risk.

In the approximately thousands of cases I’ve handled against brokerage firms, I have seen countless instances where financial advisors and stockbrokers make trades in investment accounts acting as if they had discretionary authority even though the paperwork signed by the customer indicates that the account is supposed to be treated as a non-discretionary account (asking permission).

In these cases, the customer may have various avenues for recovery against an investment professional and a brokerage firm for losses that occurred as a result of the trades made by the broker. These include claims for unauthorized trading, and recommending the purchase of unsuitable investments, as well as claims for breach of fiduciary duty relating to the brokerage control over the investment account.

Whether you have suffered investment losses in a non-discretionary or discretionary account, it is important to understand that you do have legal rights and you may be able to recover your losses if there is misconduct, regardless of whether the broker was acting on a discretionary or non-discretionary authority. 

Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
crosschevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram