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Rules & Regulations

Father-Son Broker Team Taken Down for Discretionary Trading

May 4, 2020

by Howard Haykin



A couple of brokers – probably a father-son team - with Boston-based Moors & Cabot were caught engaging in unauthorized discretion in customers’ accounts.


Discretionary trading occurs when a broker trades, buys or sells securities in a customer’s account without the customer’s approval. Non-discretionary trading occurs when the customer decides on what trades to make.
Securities rules require that, prior to exercising discretionary trading authority, a customer must provide written authorization and the broker-dealer must accept the account as a ‘discretionary account’.


Remarkably, both brokers were "first time offenders," meaning that neither had ever been sanctioned for a securities violation - though their careers in financial services spanned 54 years and 24 years, respectively. Yes, That’s Really Remarkable.



WHAT WENT WRONG.    Over a 3-1/2 year period, the pair executed 11,500 trades in 221 accounts without first consulting their customers. While those numbers may seem high, they actually average down to about 1 trade per month in each customer’s account. The severity of the violations is further tamped down by the likelihood that the brokers got a ‘verbal OK’ from these customers to execute trades in their accounts.



CUSTOMER TAKE-AWAY.    Not that Financialish condones such violations of securities rules, which are designed and maintained to protect investors from unscrupulous brokers. But rather, Financialish believes it is important for brokerage customers to understand that, notwithstanding their confidence in a broker or financial adviser, discretionary trading authority is a sensitive issue in the securities industry - - - and it's typically not permitted.


Which means that, if a broker or financial adviser executes a trade in a customer's account without first consulting that customer, then he or she may be violating securities rules. If caught, that broker is likely to be fined and suspended. [In today’s cases, each broker was fined $7,500 and suspended 3 months.]



[For further details on the father, click on … FINRA Case #2020065196802.]

[For further details on the son, click on … FINRA Case #202006519680.]