According to FINRA, Matt Ward was fined $5,000 and suspended from association with any FINRA member in all capacities for 15 business days.

Ward exercised discretion in customer accounts without prior written authorization from the customers and without his member firm having accepted the accounts as discretionary. He effected trades in customer accounts without first speaking to the customers prior to execution on the date of the transactions. Although Ward's customers knew he was exercising discretion in their accounts, he had not obtained the required written authorization.

Discretionary authority allows a financial professional to make investment decisions on behalf of a customer without obtaining the customer's approval for each specific transaction. Because of the significant trust and responsibility involved, FINRA rules require written authorization from the customer and acceptance by the firm before discretionary authority can be exercised. These requirements create a clear record of the scope of authority granted and ensure that firms can properly supervise discretionary trading.

When registered representatives exercise discretion without proper authorization, it creates several risks. Customers may not fully understand that their representative has been given authority to trade without their approval. Firms cannot properly supervise discretionary trading if they are unaware that discretion is being exercised. The lack of proper documentation also makes it difficult to resolve disputes about whether specific transactions were authorized.

While Ward's customers apparently understood and accepted the discretionary arrangement, his failure to obtain written authorization and firm acceptance violated important procedural safeguards. For investors, this case underscores the importance of understanding what authority you have granted to your financial advisor and ensuring that any discretionary arrangements are properly documented.