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Investor Protection

Lackadaisical Shortcuts Taken by a Veteran Broker

September 22, 2020

[Photo:  Lackadaisical /



by Howard Haykin



A broker with, say, 28 years’ experience is bound to be routinized in his dealings with customers. Like the broker with HD Vest / Avantax Investment Services who frequently exercised unauthorized discretion in the accounts of customers when responding to their requests to disburse funds from their accounts. Turns out this violative conduct finally caught up with him when he engaged in an unauthorized trade that caused a customer to suffer a realized loss of $1,010.



WHAT WENT WRONG.    On July 27, 2016, the broker received an automated notice informing him that there was insufficient cash in one customer’s account to process an upcoming mortgage payment of $1,850 that was scheduled to be paid on August 1, 2016. So the broker called the customer, but got no answer. And rather than leave a voicemail message or send an email, the broker simply waited for the customer to return his call.


But the customer never returned the call so, by that afternoon, the broker took it upon himself to sell 1,058 shares of a mutual fund in that customer’s account, which generated proceeds of $22,163 - clearly more than was requested by the customer or needed for the mortgage payment. The sale would have caused the customer to suffer a realized loss of $1,010 had she not detected the unauthorized trade and complained to HD Vest, which then reversed the trade.



UPON FURTHER REVIEW.    FINRA found that over a 5-year period the broker had been exercising discretion in the accounts of 5 customers when responding to their requests to disburse funds from their accounts. YES, these customers had given the broker implied authority to exercise discretion in their accounts. BUT NO, they had never given him prior written authorization. AND NO, his firm never gave him written authorization to trade on a discretionary basis.



The broker was hit with a $5,000 fine and a 3-month suspension.



[For further details on the above case, click on … FINRA Case # 2016051149101.]