According to FINRA, Joel Paul Kichline was fined $5,000 and suspended for one month on January 13, 2022, for exercising discretion in customer accounts without proper authorization.

Kichline exercised discretion in customer accounts without obtaining the customers' prior written authorization and without his member firm having accepted the accounts as discretionary. The customers had given Kichline oral permission to purchase or sell securities in their accounts, but oral authorization is not sufficient under FINRA rules.

Discretionary authority allows a broker to make investment decisions for a customer without obtaining the customer's approval before each transaction. This includes decisions about which securities to buy or sell, the quantity of securities, and whether to buy or sell. Because discretionary authority gives brokers significant control over customer accounts, FINRA requires specific safeguards.

For an account to be handled on a discretionary basis, the customer must provide prior written authorization, and the member firm must accept the account as discretionary in writing. These requirements create a paper trail documenting the authorization and ensure that both the customer and the firm understand that discretionary trading is occurring. Firms that accept discretionary accounts must also implement enhanced supervisory procedures.

When brokers exercise discretion without proper authorization, it circumvents these important safeguards. Even when customers have given oral permission and trust their broker to make decisions, the written authorization requirement protects both customers and firms by creating clear documentation of the scope of authority granted.

For investors, this case illustrates the importance of understanding whether your account is discretionary or non-discretionary. If you want your advisor to make investment decisions without consulting you first, ensure that you provide written authorization and that your firm accepts the account as discretionary. This provides important protections through enhanced firm supervision of discretionary trading.

If you have not provided written discretionary authorization, your broker should contact you before making trades in your account. Investors should review account statements carefully and question any trades that were not discussed with you in advance.