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Understanding the Difference Between Solicited and Unsolicited Trades (and Why It Matters When You Suffer Investment Losses)

When you hire a stockbroker to assist you with buying and selling securities, your broker can execute two types of trades on your behalf. Your broker can either conduct a solicited trade or your broker can conduct an unsolicited trade. This distinction is important, and if you have suffered losses investing with your broker, this distinction could determine if you are able to pursue a claim for stock broker fraud.

So, what is the difference? The main difference between a solicited trade and an unsolicited trade is:

  • With a solicited trade, your broker recommends the trade to you.
  • With an unsolicited trade, you approach your broker about buying or selling a security.

Why It Matters if a Trade is Solicited or Unsolicited

Now, why does it matter if a trade is solicited or unsolicited? When a broker recommends an investment and conducts a solicited trade, there is a higher risk of fraud. In this scenario, there are two main concerns from the investor’s perspective. The first is that the broker is recommending the trade based on a conflict of interest—maybe the broker will earn a substantial commission or stands to benefit as a stockholder. The second is unsuitability. While brokers have an obligation to make suitable investment recommendations that reflect individual investors’ portfolios and risk profiles, many fail to do so.

With unsolicited trades, investors have limited options for pursuing a fraud claim against their broker. Since the broker didn’t recommend the trade, the broker generally can’t be blamed for having a conflict of interest or making an unsuitable investment recommendation. However, investors may still have certain claims available. For example, if a broker misrepresents the fees associated with an unsolicited trade, waits too long to execute the trade or intentionally front-runs the trade, these could all potentially justify claims for fraud.

Don’t Rely on Your Broker’s Characterization of Your Trades

In many cases, investors who have suffered losses will review their trading history and see trades marked as “unsolicited” that they don’t remember asking their brokers to execute. Oftentimes, brokers will falsely mark solicited trades as unsolicited in an effort to avoid liability. The Financial Industry Regulatory Authority (FINRA) has acknowledged that this is an issue, and it has adopted FINRA Rule 2010 specifically to require the accurate marking of transactions.

Whether you have suffered losses due to a solicited trade or you believe that your broker has incorrectly marked a solicited trade as unsolicited (or both), you should consult with a lawyer promptly. You may have a claim for stockbroker fraud, and if you do, your lawyer can help you seek to recover your fraudulent investment losses through  FINRA arbitration.

Find Out if You Have a Claim for Stockbroker Fraud

Do you have a claim for stockbroker fraud? Contact us to find out. To discuss your concerns with an experienced lawyer at Zamansky LLC in confidence, call 212-742-1414 or request a complimentary consultation online today. 

 

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