You found out that some of your shares had been sold without your consent when you checked into your investment account. Since you didn’t give the order, it makes sense that you’re bewildered, irritated, and confused.
First, you need to determine who sold your stocks. If it was your broker, you might be wondering if they have the authority to sell stocks without your consent.
No, a broker cannot sell your stocks without your permission, unless you have given written authorization to do so. This is called unauthorized trading and is not permitted under securities industry rules. However, there are two exceptions to this rule:
1 Discretionary Accounts:
In a discretionary account, the broker has the authority to make investment decisions on your behalf, without prior approval. This means that they can buy and sell stocks as they see fit as long as the trades are in line with your investment policy statement and risk preferences.
2. Margin Calls:
If you have a margin account and you do not meet a margin call, the broker has the right to sell your stocks to cover the margin debt. This is done to protect the interests of the broker and the securities lending institution.
What to Do if Your Broker Sells Your Stocks Without Your Permission:
If you believe that your broker has sold your stocks without your permission, you should take the following steps:
- Contact your broker immediately. Ask them to explain why they sold your stocks and provide you with documentation of the sale.
- Review your account agreement. This will help you to understand the terms and conditions of your account, including whether or not you have given your broker discretionary authority.
- If you believe that your broker has acted improperly, you should contact a securities lawyer. A lawyer can help you to understand your legal rights and options and can take action on your behalf.
Additional Information:
- It is important to note that even if you have given your broker discretionary authority, they are still required to act in your best interests. This means that they must make investment decisions that are reasonable and prudent, given your investment objectives and risk tolerance.
- If you are unsure whether or not you have a discretionary account, you should contact your broker to find out.
- You can learn more about margin trading on the FINRA website.
In most cases, your broker cannot sell your stocks without your permission. However, there are two exceptions to this rule: discretionary accounts and margin calls. If you believe that your broker has sold your stocks without your permission, you should contact them immediately and consider seeking legal advice.
Investment Losses? We Can Help
Speak with a lawyer at The Law Offices of Robert Wayne Pearce, P. about your legal options. A.
or, give us a ring at (800) 732-2889.
Is Your Investment Account a Discretionary Account?
If a broker is trading in a discretionary account, that is the first situation in which they might sell stocks without your consent. A discretionary account is one in which the broker can choose investments for the client without the client’s consent in advance.
If you’re not sure if you have a discretionary account, click this link to find out what makes an account discretionary versus non-discretionary.
A broker needs to possess “discretion” in order to sell stocks in a discretionary account. This implies that the broker needs to have solid evidence that the sale is in the client’s best interests.
The key word in this definition is “reasonable. Accordingly, a broker cannot just sell stocks for you without your consent just because they feel like it. The sale must have a justification, such as the anticipation of a market downturn or other unfavorable circumstance that might affect the security’s value.
You have the right to object to a decision made by your broker in a discretionary account and request that a supervisor review it if you disagree with it.
Stocks: How brokerage firms make their money
FAQ
Can you be forced to sell your stock?
Can a broker force close your position?
Can a broker sell your stocks without permission?
Can I change broker without selling?
Can my broker sell stocks without my permission?
If it was your broker, you may be finding yourself asking whether or not your broker can sell stocks without your permission. Can my broker sell my stocks without permission? Your broker cannot sell stocks without your permission, unless you have given written authorization to do so.
Can a broker force me to sell my securities?
If you have a securities-backed line of credit (“SBL”), your broker or financial advisor may force you to sell your securities if the value of your account falls below the minimum required amount.
What if a broker sells stocks from my brokerage account?
If a broker sells stock positions from your brokerage account, there will generally be a valid reason why this occurred. Brokers may buy and sell stocks as they see fit in a discretionary account, as long as the trades are in line with your investment policy statement and risk preferences.
What happens if a broker forces a liquidation?
Forced liquidations generally occur after warnings have been issued by the broker, regarding the under-margin status of an account. Should the account holder choose not to meet the margin requirements, or simply cannot pay them, the broker has the right to sell off the current positions.