Misuse of trading discretion takes advantage of investors’ trust, and unauthorized trading can lead to significant financial harm. Lincoln Financial Advisors broker fraud investigations often begin when investors question what they see on their account statements.

Investors may not know whether their broker’s conduct violates FINRA Rules, especially if their broker took steps to disguise their trading activity. A structured case evaluation by a securities fraud attorney can reveal signs of misconduct and build the foundation for a broker fraud claim.

Investors can recover damages in Lincoln Financial Advisors unauthorized trading cases through FINRA arbitration.

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Discretionary vs. Non-discretionary Accounts

Your brokerage account may be discretionary or non-discretionary. In discretionary accounts, your broker can execute trades without your prior approval. If your account is non-discretionary, your broker must seek your authorization before executing a trade.

Under FINRA Rule 3260, discretionary accounts must be approved by both the investor and the firm. Crucially, this approval must be in writing. Providing verbal authorization to your broker without approval from Lincoln Financial Advisors does not mean your account is discretionary.

Unauthorized trading can occur in either type of account, but it can be difficult to detect. Brokers may go to great lengths to disguise their trading activity by misrepresenting investments, marking trades as solicited, or even fabricating account statements to cover up their trades.

You may have a case even with a discretionary account. Contact Kurta Law for a confidential case evaluation and discussion of your options for recovery.

What Qualifies as Unauthorized Trading?

At its most basic, unauthorized trading is a misuse of broker trading discretion that extends beyond what a client has approved. More specifically, FINRA Rule 3260 requires brokers to receive written approval from their client before executing a trade.

While that may sound like a narrow definition, unauthorized trading can take on many forms. Brokers violate FINRA Rule 3260 when they:

Place trades without discussing risk
Place trades when the client is unavailable to provide approval
Mismark solicited transactions as unsolicited
Make material alterations to a strategy without discussion or approval
Seek approval after executing trades
Rely on verbal or implicit approval
Churn a discretionary account

Without discussions of risk and strategy, investors cannot make balanced judgments about investments and may end up with overly complex or risky investments. Some cases of unauthorized trading involve unsuitable investments that the investor may not have agreed to if they were better informed.

Requesting approval after the fact or in non-written form are frequent themes in cases of unauthorized trading. Investors who technically authorized a trade may be able to build an unauthorized trading claim based on the circumstances of that authorization.

If you suspect your losses indicate unauthorized trading, contact Kurta Law for a structured case evaluation.

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Can Unauthorized Trading Occur in My Discretionary Account?

It’s possible to have an unauthorized trading case even if your account is discretionary. Notably, FINRA Rule 3260 prohibits excessive trading in discretionary accounts. Excessive trading, also known as churning, violates the need for quantitative suitability established by FINRA Rule 2111.

Quantitative suitability means that a series of trades aligns with an investor’s goals. Excessive trading is unsuitable because it generates broker commissions and trading fees that chip away at the client’s profits.

Overall, brokers must follow the suitability obligations of FINRA Rule 2111 no matter what type of account their client has. An in-depth account review from an investment fraud lawyer can reveal red flags in your broker’s trading activity and help you determine your next steps.

Failure to Supervise and Lincoln Financial Advisors Broker Fraud Allegations

Brokerage firms must follow the supervisory obligations of FINRA Rule 3110. Under this rule, firms must establish systems of supervision over their brokers to detect and prevent fraudulent conduct.

In the context of unauthorized trading, firms typically review broker-investor communications, patterns in trading activity, and discretionary trades. Lincoln Financial Advisors may be held liable if arbitrators find that it failed to establish adequate systems for reviewing client accounts.

FINRA Rule 3110 also requires that firms enforce their supervisory systems effectively. For example, if a broker fraud investigation finds that the firm correctly identified red flags but failed to follow up on them, it may be held liable for broker misconduct.

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Supporting Your Unauthorized Trading Claim

Securities fraud attorneys evaluate Lincoln Financial Advisors unauthorized trading claims through structured case evaluations, which involve a thorough examination of your account documentation for signs of suspicious activity.

Investors can support their unauthorized trading claims with records such as:

Account statements
Trade confirmations
Investment goals
Risk and strategy discussions

In arbitration, investors can also call upon expert witnesses to provide analysis for the benefit of the arbitration panel.

FINRA Arbitration and Lincoln Financial Advisors Broker Fraud Claims

Investors often assume they need to take their claims to civil court, but most brokerage account opening agreements require clients to seek resolution through FINRA arbitration.

FINRA arbitration offers a quicker and lower-cost path to recovery, generally resolving claims in 12 to 18 months. In arbitration, you present your case to a panel of neutral arbitrators who issue a binding and enforceable award.

Some Lincoln Financial Advisors broker fraud claims are resolved through settlement. It’s important to remember that settlement offers are not admissions of wrongdoing or liability on the part of the firm.

The first step in addressing your losses is seeking out a case evaluation by an investment fraud lawyer. A structured review of your account can reveal patterns of broker misconduct and signs of firm liability that can lead to greater damages awarded in arbitration.

Do You Have a Lincoln Financial Advisors Unauthorized Trading Claim?

If you believe your broker executed unauthorized trades, it’s vital to reach out to a securities fraud attorney right away. At Kurta Law, we rigorously pursue financial recovery for our clients, using our years of litigation experience and familiarity with a wide range of investment products to build strong cases.

Contact Kurta Law today for a no-cost structured case evaluation by a skilled investment fraud lawyer.

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