According to FINRA, David Lau was assessed a deferred fine of $6,000 and suspended for 20 days in all capacities for exercising discretionary trading authority to effect trades in customer accounts without first obtaining written authorization from customers and his firm to treat the accounts as discretionary.

Discretionary authority allows a representative to decide which securities to buy or sell, the amount of securities, and whether to buy or sell, without obtaining the customer's prior approval for each transaction. This significant authority requires written customer authorization and firm acceptance because it gives the representative substantial control over customer assets.

Trading accounts on a discretionary basis without proper written authorization violates customers' rights to approve transactions in their accounts and deprives firms of the ability to properly supervise discretionary trading. Firms typically have heightened supervisory procedures for discretionary accounts because of the increased risk of unsuitable or excessive trading.

Even when customers verbally authorize a representative to make decisions or the representative acts in good faith believing they have authority, written authorization from the customer and firm acceptance are required before exercising discretion. The writing requirement protects both customers and representatives by clearly documenting the scope and limitations of authority granted.

Investors should understand that granting discretionary authority is a significant decision that should only be made after careful consideration. Any discretionary authority should be clearly documented in writing, with specific limitations if desired. Customers should regularly review discretionary account activity to ensure it aligns with their investment objectives.

The 20-day suspension holds Lau accountable for exercising discretion without proper written authorization.