Solicited Trades Vs. Unsolicited Trades

Understanding whether your investment was made through an unsolicited or solicited trade can be crucial in determining your rights as an investor, especially if you’re pursuing a FINRA arbitration claim to recover losses. While the terms may sound technical, they play a significant role in assessing whether your broker acted in your best interest.

In this post, we’ll explain the key differences between solicited and unsolicited trades, why it matters for claims, and what to do if you believe a broker made an improper recommendation.

Why Does It Matter If Your Trades Are Solicited in a FINRA Claim?

The White Law Group represents investors in claims against their brokerage firms to recover investment losses. Many of these claims involve the sale of unsuitable investments, such as: 

• Non-traded REITs
• Private placement investments
• Annuities
• Unit investment trusts

If you find yourself in a dispute with your broker about a potentially unsuitable investment recommendation, it will matter whether the trade was solicited vs. unsolicited.

That single detail can have a dramatic effect on your ability to recover losses. If a broker marks a trade as unsolicited, even when it wasn’t, the firm may argue that you made this decision and that they bear no responsibility.

What’s the Difference Between a Solicited and Unsolicited Trade? 

A solicited trade is a transaction recommended by the broker or brokerage firm to the client and should be in the client’s best interest. An unsolicited trade is a transaction initiated by the client to the broker; in other words, it was your idea to invest in the product.

In practice, this often comes down to what was said during phone calls, in-person meetings, and emails. If your advisor influenced your decisions in any way (even subtly), FINRA may consider such trades as solicited.

Suitability Claims – Why Solicited Trades Matter 

If your broker solicited an investment but didn’t explain to you the risks involved, and you lost money, he could be held liable for your investment losses through FINRA arbitration. 

In the event you have a dispute with your broker concerning representations that were made to you about the investment, you may not have a case if the investment was your idea. You can find out more by reading your trade confirmations to see what was reported as unsolicited vs. solicited trades. Your broker is required by FINRA rules to mark each trade as either solicited or unsolicited properly. 

These claims often hinge on this distinction. If a trade is considered solicited, it means a broker owes their client (an investor) a duty of care. This duty includes conducting due diligence, disclosing risks, and ensuring that the investment aligns with the investor’s profile.

FINRA Rules Regarding Solicited vs. Unsolicited Trades

FINRA Rule 2010 Standards of Commercial Honor and Principles of Trade says that “a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” This measure is comprehensive and applies to various aspects of the securities industry. The gist of it? Dishonest conduct is prohibited. 

In this particular case, it would require a broker or financial advisor to mark trades as solicited if they are correctly made. 

FINRA Rule 2111 Suitability  

FINRA plays a vital role in the way investors operate. This authority also has extensive rules regarding solicited trades vs. unsolicited trades.

If your broker recommends a trade without having a reasonable basis for doing so, this person could violate FINRA Rule 2111 (Suitability). 

The rule states that FINRA members (your advisor or broker-dealer) must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the customer’s investment profile.  

A customer’s investment profile includes, but is not limited to, a customer’s:

• Age
• Other investments
• Financial situation
• Tax status
• Investment objectives
• Investment experience
• Investment time horizon
• Liquidity needs
• Risk tolerance
• Any other information the customer may disclose to the member or associated person in connection with the recommendation.

Marking the Trade Solicited or Unsolicited

FINRA Rule 4511 requires brokerage firms to maintain accurate books and records. If a broker improperly marks a trade as unsolicited when it was, in fact, solicited, they could face trouble with regulators. Mismarking trades is a serious offense in FINRA’s eyes and could result in a broker being suspended or heavily fined. Again, it boils down to suitability claims. Firms need to monitor whether these transactions were suitable for their clients. 

Examples of Mismarking Trades as Unsolicited vs. Solicited 

As we previously reported, a JP Morgan broker was suspended in 2021 for 18 months after he allegedly executed 577 unauthorized trades in a customer’s account and mismarked 4,714 solicited trades in three customer accounts as “unsolicited.”

The broker allegedly recommended an average pricing investment strategy to his customers in which he executed orders by breaking them into multiple small trades, each generating a separate commission, yet had no reasonable basis to believe this strategy was suitable for his customers. 

In 2015, Sterne Agee Financial Services was censured and fined $25,000 after one of Sterne Agee’s registered representatives mismarked approximately 966 order tickets as “unsolicited” when, in fact, they were not. The firm failed to detect the mismarked tickets and enforce its written supervisory procedures, which prohibit the solicitation of inverse or leveraged exchange-traded funds.

Frequently Asked Questions

What is trader mismarking?

It occurs when a broker or advisor mislabels a trade as solicited or unsolicited, often to avoid regulatory scrutiny or shift liability away from their employer. An example would be a broker labeling a trade as unsolicited when it was solicited to shield themselves and the firm employing them from any post-investment liability.

How do investment recommendations relate to FINRA’s suitability rule?

This type of guidance is the foundation of FINRA Rule 2111, which outlines information about suitability claims. When a broker recommends a specific investment or strategy, they must ensure it aligns with a client’s unique profile (their age, income, investing goals, etc.). If a broker’s recommendations don’t match a client’s wants and needs, even if said investor agrees to proceed, the recommending broker and the firm that employs them can be held liable through FINRA arbitration.

Are unsolicited trades bad?

Not inherently. However, they do carry risks. Essentially, you’re gambling on trades because there’s no formal investment recommendation from a broker. In other words, the responsibility for the outcome of investments like these falls on the investor’s shoulders. That means you could face a tough time filing a suitability claim for an unsolicited vs. a solicited trade.

FINRA Arbitration to Recover Investment Losses

FINRA operates the largest securities dispute resolution forum in the United States and has extensive experience in providing a fair, efficient, and effective venue to handle a securities-related dispute, including those involving solicited trades vs. unsolicited trades

Investors can file an arbitration claim or request mediation through FINRA when they have a dispute involving the business activities of a brokerage firm or one of its brokers. To be considered, the alleged act that resulted in the claim must have occurred within the past six years.    

If you are concerned about unsuitable investment recommendations by your financial advisor, don’t wait to take action.  Please call the White Law Group at 888-637-5510 for a complimentary consultation with a nationally recognized FINRA attorney.  

The White Law Group, LLC, is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to representing investors in FINRA arbitration claims against brokerage firms throughout the United States.    

The White Law Group’s FINRA arbitration attorneys have handled over 800 FINRA arbitration claims, many of which have involved solicited trades vs. unsolicited trades.

For information on The White Law Group and its representation of investors in claims against brokerage firms, visit https://whitesecuritieslaw.com.

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