What Is an Unsolicited Trade and What Should You Do?

Understanding how investment transactions are initiated and recorded is important for managing personal finances. Every action within an investment account, from buying shares to selling bonds, originates from a specific instruction or agreement. A clear understanding helps investors identify any discrepancies or unauthorized movements within their accounts, ensuring activity aligns with personal investment goals.

Distinguishing Unsolicited and Solicited Trades

An unsolicited trade is a transaction executed in an investor’s account without their explicit prior request or authorization. This means the investor did not initiate the buy or sell order, nor did they provide permission for it. Such trades typically appear unexpectedly on account statements or trade confirmations.

In contrast, a solicited trade occurs when the investor actively initiates the transaction or provides clear consent after receiving a recommendation from their broker. For instance, if an investor calls their broker to place an order for 100 shares of a specific company, that is a solicited trade. Similarly, if a broker suggests investing in a particular mutual fund, and the investor agrees and authorizes the purchase, that also constitutes a solicited trade.

How Unsolicited Trades Occur

Unsolicited trades can arise from several circumstances, often stemming from errors or misconduct. One common cause is a broker error, where a mistake might lead to an unintended transaction. This could involve inputting an incorrect stock symbol, misinterpreting a client’s instructions, or entering the wrong quantity of securities.

Another scenario involves unauthorized trading by a broker, which is a more severe issue. This occurs when a broker executes trades in an investor’s account without permission, violating industry rules such as FINRA Rule 2010, which prohibits unauthorized transactions. This can happen even in non-discretionary accounts, where brokers are required to obtain client consent for each trade. A broker might also exceed the agreed-upon authority in a discretionary account, where limited permission is granted to make trades without prior approval for each specific transaction. FINRA Rule 2510 requires written authorization for discretionary power.

Addressing an Unsolicited Trade

Identifying an unsolicited trade begins with a thorough review of investment documents, such as trade confirmations and monthly account statements. Investors should examine these documents promptly upon receipt to spot any unrecognized or unauthorized transactions. Regular monitoring of account activity is important for detecting discrepancies early.

Upon discovering an unsolicited trade, contact the brokerage firm directly. First, speak with the broker, and if the explanation is unsatisfactory, escalate the issue to the branch manager or the firm’s compliance department. Document all communication and submit a formal written complaint to the firm, retaining copies of all correspondence and account statements. Brokerage firms may deny responsibility if the customer fails to object to disputed transactions in a timely fashion.

If the issue remains unresolved with the brokerage firm, investors can escalate their complaint to relevant regulatory bodies. The Financial Industry Regulatory Authority (FINRA) investigates complaints against brokerage firms and their employees, imposing disciplinary actions like fines or suspensions. Investors can file a complaint with FINRA, which may lead to an investigation and potentially an arbitration process to resolve the dispute and seek recovery for losses. The U.S. Securities and Exchange Commission (SEC) oversees the securities industry and can investigate violations of federal securities laws, including unauthorized transactions. While the SEC primarily enforces laws and may not recover money for individual investors, reporting to them can lead to enforcement actions against firms or individuals involved.