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The cost brokers pay for client fraud

On Behalf of | Nov 29, 2021 | FINRA |

When the Pennsylvania FINRA sanctions a broker for excessive trades, that broker’s license and job could be at risk. Common rights are what allow you to take action against a broker that breaks the law. Churning is what those in the financial industry call the schemes that an illegitimate broker has. Account-holders need keen eyes for what happens in their accounts. Most disputes can be dealt with by contacting a broker; others require public litigation.

What is excessive trading?

The FINRA deems excessive trading as either an error on the client’s or broker’s part. Who instigates the trading dictates the penalties involved. The client of a broker is the retail trader; this person makes trades but uses the broker to transact each trade. The client, being the account holder, could make poor decisions that lead to excessive trading. When the fault of excessive trading is deemed the broker’s, however, it usually involves malice, fraud or deceit.

How to avoid shady brokers

The Financial Industry Regulatory Authority, though private and corporate, is responsible for regulating broker fraud. Lawyers even use the guidelines of this agency in court—while also judging brokers based on their memberships with the FINRA. The transparency that brokers need to offer could cost them their careers if not provided to their clients. In such cases, the FINRA has, itself, revoked employees and issued fines worth thousands.

The FINRA in Pennsylvania

Unauthorized transactions are the easiest way a broker frauds a client. No one but the account owner has the right to trade their account. Unauthorized trading can even occur in ways that look like accidents, so you have to follow up with your broker if you suspect wrongdoing. Be critical when accounting a brokered account, and keep track of each trade.

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