Unauthorized Trading

Before an investment advisor can place a trade on behalf of a customer, the customer must first provide verbal approval of the trade.  Under optimal circumstances, the financial advisor has recommended the trade after determining that the recommendation is Suitable for the customer.  This approval, assuming the investment is publicly traded, must occur the same day that the trade is placed.  Only where the customer has given their financial advisor discretionary trading privileges (which requires extensive, formal written authorization), can a financial advisor place a trade without first obtaining verbal approval from a customer.

Failure to obtain such approval absent discretion constitutes unauthorized trading and/or improper use of discretion. Unauthorized trading can give rise to a host of issues because it can expose customers to unknown risks.