Formality is substance in the business of investing; casual account management is not allowed. Either you discuss every trade with your broker, or your broker obtains written discretionary power, with no exceptions!
The Financial Industry Regulatory Authority (FINRA) accepted on April 27, 2015 a Letter of Acceptance, Waiver and Consent No. 2013037694701 (AWC) from Stuart Conley, a former broker of UBS Financial Services Inc. and Further Lane Securities, L.P. for placing discretionary trades in 21 separate accounts. It was address by the AWC that Mr. Conley allegedly failed to obtain prior written consent from the account owners to make discretionary trades.
Failing to obtain prior written consent violated FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) and Rule 2510 (Discretionary Accounts). Rule 2010 requires that all FINRA members shall observe high standards of commercial honor and just and equitable principles of trade. Rule 2510 prohibits brokers from exercising discretionary power in a customer’s account without first obtaining written authorization from that customer and the employing broker-dealer.
Brokers are said to have “discretionary power” if they can effect purchases and sales of securities without the customer’s same day, prior consent. For retail investors, accounts are more typically nondiscretionary, where the broker must contact the investor and recommend trades for the client to accept or reject.
Discretionary accounts require heightened supervision. Rule 2510 mandates that in discretionary accounts, no purchases or sales may be made that are “excessive in size or frequency in view of the financial resources and character of such account.” Further, the employing broker-dealer must approve all discretionary orders and review the account regularly to enforce the bar against excessive transactions.
According to the AWC, without admitting or denying the findings, Mr. Conley consented to the imposition of a censure and fine of $5,000. It appears from his CRD Report that Mr. Conley ceased associated with UBS in or around June 2013, shortly after the discretionary trades were placed.
Malecki Law has previously investigated and successfully handled securities arbitrations concerning issues related to discretionary or “de facto” discretionary trading that may not have been properly supervised by the employing broker-dealers. If you believe you have suffered losses as a result of questionable actions taken in your securities account, please contact us immediately for a confidential consultation.