FINRA Suspends Broker for Unauthorized Mutual Fund Trades

FINRA suspended a broker for placing unauthorized mutual fund trades in the accounts of four customers.

According to the AWC, after an 83-year-old longtime customer passed away, each of his four adult children opened non-discretionary brokerage accounts funded with estate proceeds. FINRA said that once the accounts were funded, the broker executed 10 mutual fund purchases totaling approximately $590,795, without obtaining written or oral authorization from any of the customers, generating more than $16,000 in commissions. The customers first learned of the trades upon receiving their September 2023 account statements.

FINRA found that when one beneficiary instructed the broker to liquidate the positions, he sold those shares two business days later—but also liquidated a second beneficiary’s mutual fund holdings without authorization, resulting in realized losses for both customers. FINRA stated that two other beneficiaries retained their positions and ultimately realized gains, from which the broker earned an additional $7,480 in commissions.

FINRA determined that the broker violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

The broker consented to (i) a one-month suspension from associating with any FINRA member in all capacities, (ii) a $7,500 fine, and (iii) disgorgement of $7,480 plus interest.