What to Do if Your Financial Advisor Bought Stocks without Telling You
What is FINRA Rule 2010? FINRA Rule 2010 is a broad, sweeping rule that is utilized to address misconduct that is not directly addressed by another FINRA rule. The rule is centered around the use of ethical business practices by brokers and financial institutions....read more
Purchasing stocks is one of the most important functions a financial advisor or stockbroker can perform for his or her clients. However, advisors generally must obtain permission before buying stocks or other securities. Unless you contractually authorized your advisor to purchase stocks using his or her discretion, your advisor likely violated your rights by making an unauthorized purchase, or engaging in other unauthorized transactions. If your financial advisor bought stocks without your authorization, you should discuss the situation with an experienced unauthorized trades attorney. Depending on the circumstances, it may be appropriate for you to bring a securities fraud claim with the Financial Industry Regulatory Authority, or FINRA, which could enable you to recover compensation for financial losses resulting from the unauthorized purchase of stocks. Continue reading to learn more about what you can do as an investor should you ever find yourself in this scenario with your broker or financial advisor.
What to Do if Your Broker or Financial Advisor Purchased Stocks without Your Permission
Unauthorized trading is exactly what it sounds like: trading that occurs without the permission of the investor. Of course, there are many cases in which an investor will grant his or her advisor “trading authorization,” a common contractual clause which permits brokers to use their discretion when purchasing securities. However, even if a broker or financial advisor has obtained trading authorization, he or she must still abide by certain rules and restrictions.
For example, the financial advisor must refrain from making inappropriate trades, which are frequently referred to as “unsuitable” trades. Additionally, the broker or financial advisor must adhere to any broad conditions that are specified in the authorization clause, such as time limits. Thus, there are at least three ways in which a stockbroker or financial advisor can violate the investor’s rights – and potentially, cause serious financial losses – by buying stocks:
- Making purchases without the investor’s authorization.
- Making purchases, after receiving authorization, that do not fit the investor’s general specifications, such as buying stocks outside of a specified time period.
- Making generally unsuitable trades or purchases, with or without having obtained trading authorization. For example, a financial advisor or stockbroker might make or recommend purchases that disregard or contradict the investor’s risk tolerance, experience level, or other aspects of the investor’s investment profile. You should speak with an unauthorized trades lawyer or unsuitable investments attorney if this seems to describe (1) your current situation, or (2) an event that occurred at any point during the past six years.
If your financial advisor bought stocks without getting your permission in advance, bought stocks that went against your directives, or bought stocks that contradicted your investment profile, you should know that you have legal recourse. For one, you may file an online investor complaint with the regulatory organization FINRA, which will trigger an investigation that could result in your advisor being fined, disciplined, or otherwise sanctioned. In addition to filing a complaint, it may be necessary to enter a dispute resolution process known as “arbitration.”
FINRA arbitration is similar to, but different from, litigation, which is the process people normally imagine when they think of legal disputes. In litigation, two parties – plaintiff and defendant – present opposing evidence to a jury in court. Jurors evaluate the evidence and come to a decision, which is handed down by the judge overseeing the case.
Though sometimes necessary, litigation can be a costly and slow-moving process, which presents major disadvantages for victims of securities fraud. While not appropriate for every situation, arbitration tends to be faster, simpler, and more cost-efficient than going to trial, which may be preferable depending on the nature of the dispute.
FINRA arbitration is overseen not by a judge, but by either:
- A single arbitrator.
- A panel of three arbitrators.
The number of arbitrators assigned to your case depends on the size, dollar value, and complexity of the claim. Similar to litigation, you and the opposing party will both have opportunities to present evidence and make arguments at one or more in-person hearings. During these hearings, it is essential to be represented by a FINRA arbitration attorney, who will prepare you for each appearance and build a stronger case on your behalf.
When the arbitrator or panel has finished reviewing all pertinent evidence, the panel or arbitrator will make and issue a written decision, which is called an “award,” establishing damages, costs, and fees. If, for instance, the investor prevails, the arbitrator or panel may award him or her damages in a certain amount, depending on the extent of the investor’s financial losses.
Though there is no option for FINRA appeals, FINRA awards may be challenged under state or federal laws, which could lead to an award being vacated or overturned (canceled). Wherever you are in this process, it is crucial to be represented by a knowledgeable and aggressive FINRA attorney.
Unauthorized Trades Lawyer Handling FINRA Arbitration Claims for Investors
At the law offices of Epperson & Greenidge, LLP, our skilled team of FINRA arbitration lawyers brings years of experience to every claim we handle. We are proud to fight on behalf of business owners, homeowners, seniors/retirees, and other fraud victims, and have successfully recovered substantial awards for clients who were facing challenging circumstances. If your broker or financial advisor purchased stocks without your permission, or urged you to buy stocks that went against your investment profile, Epperson & Greenidge, LLP may be able to help. To arrange a free legal consultation with our FINRA lawyers, contact us online, or call today at (877) 445-9261.