According to FINRA, Neil David Berlant was fined $10,000 and suspended for five months for exercising discretionary trading authority in customer accounts without proper authorization.

Berlant obtained verbal permission from customers to exercise discretion in their accounts and executed securities transactions in reliance on their grant of discretionary authority. However, verbal permission is not sufficient. FINRA rules require written authorization from the customer and written approval from the firm before a broker can exercise discretion. These requirements exist to protect customers from unauthorized trading and to ensure proper oversight by the firm.

In addition, Berlant falsely stated on his firm's annual compliance questionnaires that he did not exercise discretion in customer accounts. This false certification prevented the firm from discovering and supervising the discretionary trading.

Berlant also caused the firm to maintain inaccurate and incomplete books and records. He used his personal email address to communicate with customers about securities transactions in their firm accounts but never disclosed this to the firm or provided copies of the correspondence. He also falsely stated on compliance questionnaires that he did not use personal email for business communications. During the firm's investigation, Berlant deleted all records from his personal email account, destroying evidence.

Furthermore, Berlant concealed his unauthorized discretionary trading by improperly marking order tickets as unsolicited, causing the firm to maintain inaccurate books and records about these trades.

Investors should understand that discretionary authority allows a broker to make investment decisions without obtaining prior approval for each transaction. Because this authority can be abused, it must be properly documented and supervised. Brokers who exercise discretion without proper authorization pose significant risks to customers. The use of personal email to conduct securities business, false compliance certifications, and destruction of evidence compound the seriousness of the violations and demonstrate consciousness of wrongdoing. Investors should ensure any discretionary authority is properly documented in writing and should regularly review all account activity.