Securities Litigation Attorneys Representing Clients Nationwide
When most clients come to Weltz Law for investment fraud cases, one of the first things our securities litigation attorneys want to know is whether their investment accounts are discretionary or non-discretionary. Unfortunately, most of them don’t have an answer to this question. This is mainly because most brokers fail to explain the difference between the two so that they can take advantage of their customers and engage in unethical behavior without being detected. If you have suffered financial losses in a discretionary or non-discretionary account, it is integral to know that you have legal rights, and it is possible to recover the losses if there is proof of misconduct on the side of your stockbroker or brokerage firm. Simply give us the details of your case and trust us to do the rest!
Discretionary Vs. Non-Discretionary Accounts
Once you open an account with a stockbroker or brokerage firm, one of the most important things you shouldn’t forget to check is whether your account is discretionary or non-discretionary. Failing to understand the status of your account is a huge investment mistake that could result in financial losses.
What is a Discretionary Account?
A discretionary account is an investment account where the broker can determine if a trade is valuable or not at their own discretion. This account gives the financial advisor the power to make individual trades without prior permission from the investor. This doesn’t mean that the broker can make any trade they want. The broker must make decisions that are in the best interest of the customer, and which are in line with an investor’s goals and objectives.
What is a Non-Discretionary Account?
A non-discretionary account doesn’t give a broker the right to make any trades without the consent of the investor. In this account, the work of a broker or financial advisor is to execute the needs of a client at the best available market price. In some cases, a broker may recommend trades for the client in a non-discretionary account – it depends on the client-broker relationship. It’s worth noting that in a non-discretionary account, a brokerage firm is not legally allowed to make any securities purchases or sales without the client’s approval.
How Does Fraud Occur in Discretionary and Non-Discretionary Accounts?
Most FINRA arbitration cases involving discretion vs. non-discretionary accounts occur when brokerage firms and stockbrokers act as though they have discretionary authority and make trades in clients’ accounts even when documents signed show that the accounts should be non-discretionary. If you find yourself in such a situation and lose money as a result, you can make claims for breach of fiduciary duty, unauthorized trading, and unsuitable investments relating to brokerage control over a non-discretionary investment account. As long as you work with seasoned legal professionals like those found at Weltz Law, you will undoubtedly recover your losses.