What Are Unauthorized Trades?
Unless you gave your broker written discretionary authority, they need your approval before every trade. Selling a position you wanted to hold, or buying something you never discussed, is not a service — it is a trade made without the consent the rules require.
FINRA rules are clear: a broker must obtain the customer's prior authorization for each transaction in a non-discretionary account. Even in discretionary accounts, the broker must act consistently with the customer's investment objectives and not engage in trading that is inconsistent with the account's stated purpose.
Warning Signs
Trades You Didn't Approve
Positions appear or disappear in your account that you never authorized.
After-the-Fact Notification
You are told about a trade only after it was already executed.
Liquidated Holdings
A long-held position was liquidated without a conversation or explanation.
Disputed "Verbal" Approvals
Your broker claims you "verbally agreed" to something you do not recall.
Types of Unauthorized Trading
- Unauthorized purchases: Buying securities you never discussed or agreed to
- Unauthorized sales: Selling positions you intended to hold long-term, often triggering tax consequences
- Unauthorized margin use: Borrowing against your account without your knowledge to fund additional trades
- Unauthorized account changes: Altering your investment objectives or risk tolerance in firm records without your knowledge
Your Rights Under FINRA Rules
FINRA Rule 3260 explicitly requires written authorization from the customer before a broker exercises discretion. Without that written grant, every trade requires prior approval. If your broker made trades without your permission — even once — you may have grounds for a claim.
Additionally, the brokerage firm has a duty to supervise its brokers. If a firm's compliance systems failed to catch unauthorized trading, the firm itself may be liable for the resulting losses.
Trades made without your permission?
Time limits apply. Let us review your account statements and assess whether unauthorized trades caused your losses.
Request a Free Case Review Call 954-464-3739Frequently Asked Questions
Many investors don't realize unauthorized trading occurred until they review their statements later. The fact that you didn't immediately object does not bar your claim, though acting promptly once you discover the problem strengthens your position.
Unauthorized trading means specific trades were made without your approval. Churning means the overall volume of trading was excessive. Both are violations, and they sometimes occur together in the same account.
Generally, yes. Damages are typically calculated on a net basis across all unauthorized transactions. Even if some unauthorized trades made money, you may still recover for the overall harm to your portfolio.