What’s the Difference Between Solicited & Unsolicited Trades?

The main difference between solicited and unsolicited trades is who initiates them. In a solicited trade, the financial advisor recommends the transaction to the client. In an unsolicited trade, the client requests the transaction, and the financial advisor carries it out on their behalf.

If you notice any suspicious activity or unexplained losses in your investment portfolio, an experienced Los Angeles investment fraud lawyer will investigate the situation. They can determine whether these irregularities were due to mishandling, negligence, or fraud, regardless of whether the trades were solicited or unsolicited.

What Are Solicited Trades?

Solicited trades are transactions that a financial advisor actively recommends to a client. They suggest specific trades, such as buying or selling certain stocks, bonds, or other securities, based on the client’s investment strategy. The advisor explains why they believe the trade is suitable and reviews the potential benefits and risks.

Since the financial advisor initiates and recommends these trades, they’re responsible for ensuring the transaction aligns with the client’s interests. It must also comply with industry standards, such as the “suitability rule” or the “best interest rule” which requires them to recommend investments that fit the client’s true investor profile.

What Are Unsolicited Trades?

Unsolicited trades are transactions that clients request on their own without a recommendation from a financial advisor. In this type of trade, the client decides to buy or sell a specific security, like a stock or bond, and instructs the advisor to carry out the transaction.

Advisors typically mark these trades as “unsolicited” to document that the trade was initiated by the client and not influenced by their advice.

Why the Difference Between Unsolicited and Solicited Trades Matters

Although ever case and circumstance is different, generally speaking, the difference between unsolicited and solicited trades in some cases affects who is responsible for the decision to buy or sell an investment. Knowing the difference helps you understand your level of protection and accountability in each type of trade.

In a solicited trade, the financial advisor recommends the transaction and is responsible for ensuring that it’s suitable for the client. In an unsolicited trade, however, the client decides on the transaction independently, and the advisor carries out the order.

Understanding Suitability

Investment suitability means making sure that any investment is a good match for your financial situation and goals. Suitability is about choosing investments that fit your needs and comfort level rather than one-size-fits-all choices.

For example, a retired person may want safe, stable investments, while a younger person might handle higher-risk options with the potential for growth. Suitability helps ensure that each investment is carefully chosen to support a person’s unique financial situation.

Factors that determine an investment’s suitability with an investor’s profile include:

• Financial goals
• Risk tolerance
• Time horizon
• Age and stage of life
• Income level
• Net worth and assets
• Investment experience

In a solicited trade, where a broker recommends a transaction, they must follow the “suitability rule.” This means the broker must assess whether the investment is a good fit for your overall investment profile before suggesting it. They are responsible for ensuring that the recommendation is appropriate for you, which provides an extra layer of protection.

FINRA Regulations on Suitability

The Financial Industry Regulatory Authority’s (FINRA) rule on trading suitability requires financial advisors to ensure that any investment they recommend fits the client’s financial situation.

FINRA divides suitability requirements into three types:

• Reasonable–basis suitability: The advisor must understand the risks and benefits of an investment.
• Customer–specific suitability: Advisors must match recommendations to the client’s financial profile.
• Quantitative suitability: Advisors must avoid making too many trades in a client’s account, which could be more about generating commissions than serving the client’s best interests.

These rules protect investors by ensuring that brokers are recommending investments that align with their financial needs and goals. An experienced securities fraud attorney can determine if your advisor was negligent.

Recognizing a Properly Traded Investment Ticket

A correctly processed investment ticket should show that the investment was suitable for the client. The ticket should clearly mark whether the trade was solicited (recommended by the advisor) or unsolicited (initiated by the client) and include details such as the trade date, price, and quantity.

Additionally, it should reflect compliance with FINRA’s suitability rules, ensuring that the investment aligns with the client’s overall profile and that trades aren’t excessive in frequency or volume. Proper documentation on the ticket protects both the client and advisor by demonstrating that the trade followed regulatory guidelines.

A Securities Fraud Lawyer Can Help

The legal team at Meyer Wilson has been empowering investors to protect their rights since 1999. We want you to have all the information you need to understand your current financial standing and your options to recover losses. Our history of successful case results shows our determination to win.

Call us today to schedule a free initial consultation. We will review your claim and answer any questions you may have. Together, we can protect your financial security.