Unauthorized trading is when a broker makes a trade for a customer without the customer’s permission. This is prohibited under FINRA Rule 2010, and mostly applies to investor accounts that are “non-discretionary,” which are accounts where the broker must obtain the customer’s permission before each trade. A claim for unauthorized trading can also encompass a “failure to execute,” where the broker failed to timely buy or sell an investment that the customer ordered.

There are instances where a broker can be held liable for unauthorized trading even in accounts that are “discretionary” – i.e., accounts where the customer signed a document that gave the broker discretion to make trades without prior customer approval. In such instances, the customer would need to demonstrate that the customer’s assent was not given intelligently or with full knowledge of the facts. Thus, when a customer is lacking in information, skill, or experience with regard to the broker’s recommendations, the broker may still be held liable for misconduct or for exceeding the limits of authority granted by the customer.