According to FINRA, Jilena Yuen-Han Mok was fined $10,000 and suspended for two months for effecting trades in a customer's non-discretionary account without authorization and exercising discretionary authority without proper authorization and firm acceptance.
Mok effected trades in a customer's account without the customer's authorization, knowledge, or consent. The firm later offered to reverse the trades, but the customer declined. Mok also exercised discretionary authority with respect to trades in customer accounts without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary by the firm. In addition, Mok had not communicated with the customers prior to execution on the day of the trades.
Unauthorized trading is a serious violation because it means the broker is making investment decisions for customers without their permission, potentially exposing them to unwanted risk or inappropriate investments. When customers don't authorize trades, they may end up owning securities they never wanted or taking losses on positions they didn't know they had.
Discretionary authority allows a broker to make trading decisions without contacting the customer for each trade, but it requires prior written customer authorization and firm acceptance of the account as discretionary. These requirements exist to protect customers by ensuring they knowingly grant such authority and that the firm supervises discretionary trading appropriately. When brokers exercise discretion without proper authorization, they evade important customer protections and supervisory safeguards.
Investors should carefully review their account statements and confirmations to verify that all trades were authorized. If trades appear that were not specifically approved, investors should immediately contact their firm and report unauthorized trading. Investors should also understand that granting discretionary authority is a serious decision that should only be done with full understanding and appropriate documentation.
