Recomendations and transactions made by stockbrokers on behalf of thier customers can be categorized as either solicited or unsolicited. The key difference is:
- Solicited trades are transactions that a broker recommends to a client or provides information or research on when an investment is dicussed with a client.
- Unsolicited trades are initiated by the client, who requests that the financial advisor execute them.
Why is The Distinction Between Solicited and Unsolicited Important?
If a solicited trade results in substantial investment losses, the investor may hold the broker or brokerage firm accountable. Another example of a recomended or trade deemed solicited is when the broker acts with discretion. If a broker trades without seeking prior permission or consent from the client, the broker is deemed to have acted using discretion and bears full responsiblity for the investment.
By contrast, if a client initiated an unsolicited trade — holding the broker responsible for losses can be more difficult.
The Role of FINRA Rule 2010
FINRA Rule 2010 requires brokers to accurately report whether a transaction was solicited or unsolicited. Correctly marking a trade is an essential recording keeping responsiblity of a brokerage firm. Unfortunately, some brokers and firms may wrongly mark solicited trades as unsolicited to try to avoid responsibility.
Unsuitability and FINRA Rule 2111
Whether a trade is solicited or unsolicited can also impact claims under FINRA Rule 2111. This rule mandates that brokers only recommend suitable investments for a client’s risk tolerance and profile. If a solicited trade was unsuitable and led to significant losses, an investor may have a stronger case to recover damages through arbitration.
If you have Questions Concerning Whether a Trade Was Solicited or Unsolicted, Seek Legal Counsel
Regardless of whether your losses stem from solicited or unsolicited trades, pursuing such a claim without legal assistance can be challenging. Bakhtiari & Harrison’s experienced investment fraud lawyers can help guide you through the process and fight for your rights.
Bakhtiari & Harrison is an AV-rated, expereinced law firm focused on the worldwide representation of clients in complex arbitration, litigation, and related legal services in securities industry matters.
The firm’s partners have extensive experience in securities, employment and regulatory matters. Our focus is on delivering strategic and creative client-centric solutions.
We represent high net-worth individuals, institutions, and hedge funds in securities arbitration and litigation claims before FINRA (Financial Industry Regulatory Authority), AAA (American Arbitration Association), other arbitration providers, and state and federal courts.