When you work with a broker, you want his or her guidance on your investments, and you also want to authorize any transactions made on your behalf. But some brokers conduct transactions without the prior authorization of their clients.
According to the U.S. Securities and Exchange Commission, unauthorized trading occurs when an investor or broker makes trades for a client without getting permission first. Certain red flags can indicate unauthorized trading has happened, so you can prevent future unapproved trades.
1. Unnecessary fees
You should review your investment portfolio frequently to monitor fees. If your portfolio has incurred excessive fees or fees beyond what you agreed to, unauthorized trading may have occurred.
2. Transactions you did not authorize
When you review your investment portfolio, you should look for any transactions that you did not authorize. If you reach out to your broker about a certain transaction and he or she tries to evade your questions, it may be an unauthorized trade.
3. Recurrent trading
Any trades made on your behalf by your broker should remain in line with pre-determined investment goals and they should align with the level of risk you are comfortable with. If frequent trades occur within your portfolio and they do not align with your investment goals, your broker may not have authorization for these transactions.
Performing unauthorized transactions is a breach of fiduciary duty on your broker’s behalf. You should report any complaints of unauthorized trading to the SEC to prevent future issues with your portfolio and to protect your interests.