Unauthorized trading happens when a broker buys or sells investments in a customer’s account without asking first. This serious problem causes money losses and makes people lose trust in financial companies. The Financial Industry Regulatory Authority (FINRA) provides a way for investors to take action when brokers make trades without permission.
Filing a complaint
Investors who believe a broker made trades without permission can file a complaint with FINRA. FINRA investigates by checking trade records, account agreements, and messages between the investor and broker. Investors should collect trade confirmations, emails, and account statements to support their case.
Arbitration process
Most cases of unauthorized trading go to FINRA arbitration. The process begins when an investor submits a claim explaining the situation. The broker or company then responds. A group of arbitrators, chosen by FINRA, reviews the case, examines evidence, listens to both sides, and makes a final decision that all parties must follow.
Evidence and burden of proof
During arbitration, the investor must prove that trades happened without permission. Brokers often claim they received verbal approval or had the authority to make trading decisions. Arbitrators examine account agreements, recorded conversations, and trading patterns to determine whether the claim holds up.
Possible outcomes
If arbitrators rule in favor of the investor, they may require the broker to pay for losses, fees, or interest. In some cases, the broker may also face fines, suspensions, or industry bans. If arbitrators side with the broker, the investor does not receive compensation.
Preventing unauthorized trading
Investors can protect their accounts by monitoring activity regularly, setting clear trading instructions, and reviewing account agreements. Reporting concerns immediately can stop further unauthorized trades and strengthen a case in arbitration. FINRA ensures investors have a fair process to resolve disputes and recover losses.
Unauthorized trading weakens trust in financial markets. Holding brokers accountable through FINRA’s process helps maintain fairness. Staying informed and taking action allows investors to safeguard their accounts and ensure brokers follow ethical standards.