Recovering Losses from Unauthorized Trades & Broker Misconduct
Have you experienced unexpected or unexplained trades in your investment account? Unauthorized trading is a serious form of broker misconduct that may entitle investors to recover losses through FINRA arbitration.
At The White Law Group, our securities fraud attorneys represent investors nationwide in claims against brokerage firms and financial advisors who engage in unauthorized trading, excessive trading, or other forms of misconduct.
What Is Unauthorized Trading?
Unauthorized trading occurs when a broker executes a transaction in your account without your prior knowledge, approval, or proper authority.
This may include:
- Buying or selling securities without your consent
- Making trades that exceed granted authority
- Exercising discretion in a non-discretionary account
- Failing to inform you of executed trades
Unauthorized trading is not just unethical—it may violate industry rules and federal securities laws.
👉 Related: See also Broker Negligence, Excessive Trading (Churning), and Unsuitable Investment Recommendations.
Signs Your Broker May Be Trading Without Permission
Investors often discover unauthorized trading after losses occur. Warning signs may include:
- Trades you do not recognize
- Frequent or excessive transactions
- Unexpected account losses
- Missing confirmations or delayed statements
- Investments that do not match your risk tolerance
If you notice any of these red flags, it may be time to speak with a securities attorney.
Discretionary vs. Non-Discretionary Accounts
Understanding your account type is critical in evaluating an unauthorized trading claim.
Discretionary Accounts
In a discretionary account, you give your broker limited authority to make trades without prior approval. However:
- This authority must be granted in writing
- The account must be approved by the brokerage firm
- Trades must still be suitable and in your best interest
Even in discretionary accounts, abuse of authority can still constitute misconduct.
Non-Discretionary Accounts
In a non-discretionary account:
- You must approve every trade
- Brokers can only make recommendations
If your broker executed trades without your approval, it may be a clear case of unauthorized trading.
FINRA Rules on Unauthorized Trading
The Financial Industry Regulatory Authority (FINRA) regulates brokerage firms and enforces rules designed to protect investors.
Key rule:
- FINRA Rule 3260 – Requires brokers to obtain prior written authorization before exercising discretion in a client’s account
Failure to comply with this rule can result in:
- Fines and suspensions
- Broker termination or industry bars
- Liability for investor losses
👉 Learn more: FINRA Arbitration Process and How Long FINRA Arbitration Takes
Real-World Examples of Unauthorized Trading
Regulators frequently discipline brokers for unauthorized trading. Common scenarios include:
- Brokers exercising discretion without written approval
- Repeated unauthorized trades in client accounts
- High-risk trading strategies implemented without consent
- Failure to cooperate with regulatory investigations
These cases often result in:
- Customer complaints
- FINRA sanctions or bars
- Investor arbitration claims
Can You Recover Losses from Unauthorized Trading?
Yes. Investors who suffer losses due to unauthorized trading may recover damages through FINRA arbitration.
You may have a claim if:
- Trades were made without your authorization
- Your broker exceeded their authority
- You suffered financial losses as a result
Potential recovery may include:
- Compensatory damages
- Interest
- Attorneys’ fees (in some cases)
How The White Law Group Can Help
Our firm represents investors in all 50 states and focuses exclusively on securities fraud and investment loss recovery.
We can:
- Investigate your account activity
- Determine whether unauthorized trading occurred
- File a FINRA arbitration claim
- Negotiate a potential settlement
- Represent you through arbitration or litigation
The White Law Group has handled 800+ FINRA arbitration cases and maintains offices in Chicago and Seattle.
Speak with an Unauthorized Trading Attorney
If you believe your broker made trades without your permission, you may have legal options.
Call (888) 637-5510 for a free consultation.
No obligation to discuss your case.
Frequently Asked Questions
What qualifies as unauthorized trading?
Unauthorized trading occurs when a broker executes a transaction without your approval or without proper discretionary authority.
Is unauthorized trading illegal?
Yes. It may violate FINRA rules, firm policies, and federal securities laws.
What is the difference between FINRA and the SEC?
The SEC regulates U.S. financial markets broadly, while FINRA oversees brokerage firms and individual brokers.
How long do I have to file a claim?
Most FINRA arbitration claims must be filed within six years of the event giving rise to the dispute.
Do I need a lawyer for a FINRA claim?
While not required, working with an experienced securities attorney can significantly improve your chances of recovery.