According to FINRA, Michelle Liao Wu was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for 20 business days for placing discretionary trades in customers' brokerage accounts without written authority to do so.

Wu exercised discretion in customer accounts, meaning she decided which securities to buy or sell, the quantity, and the timing without obtaining customer authorization for each specific trade. However, the customers had not provided prior written authorization for Wu to exercise discretion in their accounts. Additionally, Wu's member firm prohibited registered representatives from exercising discretion in customer accounts except under very limited circumstances that did not apply in this situation.

Discretionary trading allows representatives to make investment decisions without obtaining specific customer approval for each trade. Because this grants representatives significant control over customer accounts, securities regulations require written authorization from customers before representatives can exercise discretion. This protects customers by ensuring they consciously consent to granting such authority and creates a clear record of the authorization.

By exercising discretion without written authorization, Wu violated both customer agreement requirements and firm policies. The violation is serious because it involves making investment decisions that legally required customer authorization without obtaining that authorization. Customers whose accounts are traded on a discretionary basis without proper authorization may not understand that their representative has this level of control over their accounts.

The 20-business-day suspension reflects that while Wu violated discretionary trading requirements, there is no indication that she made unsuitable trades or that customers suffered losses. Nevertheless, the procedural requirement of written authorization exists for important investor protection reasons and must be followed.

For investors, this case highlights the importance of understanding whether your account is discretionary or non-discretionary. If you did not sign a written discretionary agreement, your representative must obtain your approval before each trade. Investors should carefully review account agreements and should ask questions if they are unsure about whether they have granted discretionary authority. The suspension was in effect from June 20, 2023, through July 18, 2023.