Do Stockbrokers Have to Notify You of Every Trade?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
When you work with a stockbroker, it may seem like you put your money in their care and hope for the best. In reality, you have a lot of control over your investment portfolio, and your stockbroker needs to inform you of the work they do on your account and listen to your input. Many investors are not aware of the information their broker needs to disclose and of the control they actually have, and some brokers take advantage of this fact by making unauthorized trades and mishandling your investments. If your investments have suffered because your broker-dealer abused your investments, made illegal trades, or mishandled your funds, talk to our FINRA arbitration attorneys at Epperson & Greenidge about your case today. Our attorneys offer free consultations to help you reclaim lost finances and file claims against negligent brokers and financial advisors.
Does My Stockbroker Need to Disclose Trades?
When you work with a stockbroker, you usually direct them when you want to make trades. Many investors closely monitor their portfolios and specifically direct their brokers when they want to buy or sell investments or securities. However, that isn’t always the case, and your broker may manage your trades on your behalf. Regardless of how the trades occur, your broker still needs to inform you of any trades made on your account.
The Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) both have rules dictating what kind of information your broker needs to share with you. The SEC’s rules have the force of law across the country since they are written by a regulatory agency within the US government. FINRA’s rules are not law, but FINRA is the regulatory body that licenses brokers and writes rules for their conduct. Both of these sets of rules require brokers to disclose certain information about every trade they make.
First, they must disclose that the trade occurred. These are your investments, and you have the right to know when your portfolio buys or sells stocks, and you have the right to know how much they cost or how much they made you. Second, the broker must disclose where the stock came from or where it went. There are multiple types of markets your broker can buy or sell your stocks on, including exchanges like the New York Stock Exchange, “over the counter” markets like the NASDAQ, and even internal markets if the brokerage firm has the stocks in their own inventory. Your stockbroker needs to inform you where the stock came from or where it went. They also have the duty to ensure that they’re getting you the best price when they do this, and they should work to perform your transaction on the market that gives you the best price.
Not only is it against the law to fail to disclose trades made on your account, but it could also lead to other issues. Your broker may attempt to commit “trade churning” by performing unnecessary, frequent trades to rack-up transaction fees. They may also make unsuitable investments or otherwise commit financial negligence with your investments. Brokers who fail to disclose this info may be in breach of contract and could be violating FINRA rules which entitle you to file a FINRA claim against them to recover lost investments and financial damages you faced.
Can My Stockbroker Make a Trade Without My Permission?
As mentioned, you often have more control than you think with your transactions. Most brokerage agreements set the rules for what investments your broker can make without your express permission. Some investors prefer to have complete control and may notify their brokers that they do not want them to make any trades without their permission. Others may give broad guidelines and allow their brokers to make trades on their behalf without asking for explicit permission. The agreement you make with your stockbroker often dictates whether these trades are unauthorized or not.
Regardless of whether the trade is authorized, your broker still needs to inform you that the trade happened. This means that you can usually tell whether your broker is following your instructions or making trades without getting permission first since you will have a record of every transaction they made. It is important to review the records of transactions and all receipts and statements from your broker. These documents can help you track trades and notify you of any problematic trades or situations where your broker is taking advantage of you.
It is important to remember that the rules for brokerage are complex. Even if you want express control of your transactions, there may still be situations where your broker is required to make sales to meet margin calls or other SEC requirements. Talk to an attorney if you have any doubts that your broker is mishandling your funds or overstepping their authority.
FINRA Arbitration Lawyers Offering Free Consultations
If your stockbroker made trades without your consent or failed to inform you of purchases or sales in your investment portfolio, talk to the FINRA claims lawyers at Epperson & Greenidge today. Our lawyers can help you file claims against negligent stockbrokers and protect your finances. For a free consultation on your case, call our law offices today at (877) 445-9261.