The Financial Industry Regulatory Authority (FINRA) sanctioned broker Richard Lewis (Lewis) concerning allegations that Lewis exercised discretion in a customer’s account without obtaining prior written authorization from the customer. FINRA found that his conduct violated NASD Conduct Rule 2510(b) and FINRA Rule 2010.
Lewis first became registered with FINRA firm in 1989. Since then, he has been associated with several firms and from December 2010, to March 2013, Lewis was associated with LPL Financial LLC (LPL). Currently, Lewis is associated with J.W. Cole Financial, Inc.
FINRA alleged that from April 2012, to February 2013, while Lewis was associated with LPL, he effected approximately 81 discretionary transactions in the securities account of a customer without obtaining prior written authorization and without LP accepting the account in writing as discretionary.
The claims against Lewis involve unauthorized trading, which occurs when a broker sells , buys, or exchanges, securities without the prior consent or authority from the investor. Unless an investor gives the broker discretion to make trades, the broker must first discuss all trades with the investor and make sure the investments are suitable prior to recommendation. NYSE Rule 408(a) and FINRA Rules 2510(b) and 2020 explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. Unauthorized trading also is a violation of the federal anti-fraud Rule 10b and 10b-5 due to its fraudulent nature.
Victims of unauthorized trading may feel like their identity or credit card was stolen. Surprisingly, when a broker makes an unauthorized trades in clients account the firm’s goal is often to hold the investor responsible for their own broker’s misconduct. Brokerage firms will often attempt to have their clients sign documents or record conversations where the client will waive the firm’s liability and/or admit that they were “aware” of the transaction and therefore the customer consented to the transaction after the fact. Brokerage firms also often make the claim that if the investor does not object to the trade immediately, the investor ratified the trade when the investor received confirmations and/or monthly statements reflecting the transaction.
If you believe that you were the victim of unauthorized trading, the attorneys at Gana LLP can help you proceed against the brokerage firm and recover investment losses.