Unauthorized Trading: Recovering Losses From Unapproved Financial Advisor Activity

Understanding Your Account Status: Discretionary Versus Nondiscretionary

To determine whether a financial advisor committed unauthorized trading, take a look at how your account was legally established:

• Nondiscretionary accounts: In these standard accounts, the investor retains complete control over all investment choices. A financial advisor must contact the client, explain the proposed investment, and receive express verbal or written permission before every single transaction. Executing a trade without that specific conversation is a direct violation of industry rules.
• Discretionary accounts: In a discretionary account, the client signs a formal, written agreement giving the financial advisor prior authorization to make investment choices without consulting the client first. However, the brokerage firm must formally approve this status, and the trades must still align with the client’s actual financial goals.

Even if an investor verbally discusses a general investment strategy or a specific company with an advisor, that conversation does not grant the advisor a blanket license to execute trades at will. Unless formal written discretion is granted by the investor and approved by the firm, a financial advisor must obtain authorization for every individual trade. If your advisor ignored these rules, speaking with a financial advisor misconduct attorney can help clarify your options.

Know The Red Flags Of Unauthorized Trading

Unauthorized transactions can happen quietly, but careful review of account documents often uncovers specific warning signs. Watch for these indicators of financial advisor misconduct:

• Unexpected trade confirmations: Receiving confirmation slips or monthly statements for stocks, bonds, options, or mutual funds you never discussed or approved.
• Unexplained account fluctuations: Sudden, unexpected drops in total account value that do not align with overall market trends.
• Frequent portfolio activity: A sudden spike in the volume of buying and selling, which may indicate that a financial advisor is moving funds around simply to generate sales commissions.
• Deflective communication: An advisor who gives vague, confusing or defensive explanations when asked about specific account transactions.
• Sudden margin activity: Discovering borrowed funds or margin loans used to purchase securities without your knowledge or consent.

If you see any of these red flags, contact a lawyer who can help you determine if you need to dig deeper for evidence of misconduct.

Is Your Financial Advisor Violating Other Laws Or Guidelines?

Unauthorized trading rarely happens in a vacuum. It frequently occurs alongside other forms of financial advisor misconduct, including:

• Suitability: When unapproved transactions do not align with an investor’s age, risk tolerance or retirement goals
• Breach of fiduciary duty: When an advisor places their own financial interests or commissions ahead of the client’s financial well-being
• Theft and unauthorized third-party transfer: When funds or securities are removed from an account entirely without permission
• Misrepresentations and omissions: When a financial advisor hides key facts about transactions or misleads investors about portfolio activity

Attorney Richard A. Lewins, founding attorney at LewinsLaw, P.C., evidences a deep commitment to protecting investors like you from financial advisor wrongdoing. After witnessing firsthand how industry systems and financial advisor conduct frequently failed to put the best interests of clients first, he chose to enter the legal profession to defend investors.

Why Get Help From A Securities Fraud Lawyer?

Founded in May 2009, LewinsLaw, P.C., focuses exclusively on investor protection and holding brokerage firms accountable for wrongdoing. The firm is led by Mr. Lewins, a dedicated financial advisor misconduct attorney admitted to the bar in 1995, who brings over three decades of legal experience to every case.

What truly sets the firm apart is Mr. Lewins’ extensive history working inside the financial industry. Before becoming a securities fraud lawyer, he spent years working as a financial advisor and manager for major national firms, including EF Hutton, Merrill Lynch, Shearson Lehman and HD Vest, while holding Series 7 and 24 licenses. His rare, insider understanding of brokerage operations allows him to act as an effective unauthorized trading attorney, dismantling complex account records, identifying unauthorized activity and building robust recovery claims for clients nationwide from his primary office in Dallas.

Contact Mr. Lewins today at 972-893-9245 or fill out the online contact form to schedule a confidential consultation.