Trading stocks without authorization is a violation of multiple Financial Industry Regulatory Authority (FINRA) rules. If your financial advisor or broker trades your stocks without your authorization, they can face various penalties from FINRA. In addition, you can file a claim to recover damages for the money you lost.
At Meyer Wilson, we have a long history of helping victims of unauthorized trading and other forms of investment misconduct recover the compensation they need and deserve. Our experienced team of unauthorized trading lawyers will use every resource at our disposal to help with your case. Contact us today to schedule a free case review.
FINRA Penalties for Trading Stocks Without Authorization
FINRA works to protect investors by monitoring the activities of financial advisors and brokers and holding them accountable for any unlawful conduct. Unauthorized trading of stocks by a financial advisor or broker violates multiple FINRA rules and can lead to several penalties for the offender.
FINRA Rule 2010
Under FINRA rule 2010, brokers and financial advisors are required to observe “high standards of commercial honor” in their business conduct. The penalties for a violation of these standards can vary significantly depending on the severity of the offense. Any violation can result in fines and a suspension of their trading privileges.
Fines can range from $1,000 to $155,000. Meanwhile, suspensions typically range from 10 days to two years. However, in extreme cases, FINRA may choose to bar both the trader and the firm that employs them from the financial industry.
FINRA Rule 2020
FINRA Rule 2020 prohibits brokers and financial advisors from any business practices that are considered fraudulent, deceptive, or manipulative. This can include unauthorized trading. Fines for a violation can range from $5,000 to $155,000.
Suspension for individuals for violations can range from 31 days to two years, while firms can be suspended for up to 90 days. If the case involved intentional or gross misconduct, the trader or firm could be barred from the financial industry for life.
FINRA Rule 3260
FINRA Rule 3260 directly addresses unauthorized trading. Under this rule, financial advisors and brokers are barred from making discretionary trades without written authorization from their clients. Any violation of this rule can result in fines ranging from $2,500 to $16,000, and the broker or financial advisor can be suspended from trading for 10 to 30 business days.
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Legal Action from Clients
In addition to the penalties handed out by FINRA, financial advisors and brokers who trade stocks without authorization can face claims from their clients. If you suffered losses as the result of an unauthorized trade, an experienced investment fraud lawyer can help you file a claim.
In most of these cases, you will need to pursue the compensation you need and deserve through FINRA arbitration. When you sign an investment agreement with a broker or financial advisor, there will typically be language in the contract requiring that any disputes that may arise will need to be resolved through arbitration.
Arbitration offers a quicker option for recovering damages than would be possible through a courtroom trial. While arbitration is less formal that a court proceeding, there are still complexities that require experience to handle properly. An experienced investment fraud attorney can help you navigate the process and recover the money you need and deserve.
Criminal Charges
Brokers and financial advisors who trade stocks without authorization from their clients could also find themselves facing criminal charges. While FINRA and the Securities and Exchange Commission (SEC) can not bring criminal charges themselves, they can recommend criminal charges when they discover unlawful action.
The penalties for a criminal charge will depend on the severity of the offense. However, any charge carries the potential for time in jail or prison.
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The Consequences of Trading Stocks Without Authorization Can Be Severe
Financial advisors and brokers who trade their clients’ stocks without obtaining authorization can face legal battles on various fronts. In addition to fines, suspension of their ability to trade, other financial penalties, and incarceration, a violation could result in a variety of other punishments.
Furthermore, fighting multiple legal battles can cost the offender a significant amount of money in legal fees, as well as taking up a substantial portion of their time.
If your financial advisor or broker failed to obtain authorization before trading your stocks, an experienced investment loss recovery lawyer can help you secure compensation to cover any losses you suffered as a result of their unlawful trading.
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Get Help from an Experienced Investment Fraud Lawyer Today
Hiring an experienced attorney is the best way to ensure your interests are protected after losing money caused by a broker or financial advisor making trades with your investment without obtaining the proper authorization. At Meyer Wilson, we have recovered over $350 million in damages for our clients.
Our experienced team knows how these cases are handled and will do everything we can to help you get the money you need to make up for the losses caused by the unlawful actions of your broker or financial advisor.
Contact us today by giving us a call or completing our online contact form to schedule a free case consultation with a member of our legal team. We’ll review the details of your case, answer any questions you may have, and advise you of your legal options.
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