According to FINRA, Paul Richard Meyer was fined $5,000 and suspended from association with any FINRA member in all capacities for six weeks for exercising discretion without written authorization in customer accounts.

Discretionary authority allows a broker to make investment decisions for a customer without obtaining the customer's specific approval for each trade. This authority can relate to the asset purchased or sold, the amount, or the timing. Because discretionary authority gives brokers significant control over customer assets, securities regulations impose specific requirements before discretion can be exercised.

To exercise discretion properly, three requirements must be met: (1) the customer must provide written authorization granting discretionary authority; (2) the account must be accepted as discretionary by a firm principal; and (3) the discretionary trading must be closely supervised by the firm. These requirements protect customers from unauthorized trading and ensure adequate oversight.

Meyer exercised discretion in customer accounts without meeting these requirements. Although Meyer generally discussed trading with the customers, his member firm had not designated their accounts as discretionary, and Meyer did not speak with the customers on the dates of the specific transactions. This means Meyer was making trade decisions and executing transactions without the required written authorization and without obtaining customer approval for the specific trades.

The practice of trading accounts on a discretionary basis without proper authorization creates multiple problems. Customers may not be aware that trades are being executed, making it difficult for them to monitor activity and ensure it aligns with their investment objectives. The lack of written discretionary agreements means there is no clear documentation of what authority the customer intended to grant. The absence of firm designation and supervision of accounts as discretionary means supervisors are not applying the heightened scrutiny these accounts require.

Unauthorized discretionary trading can be particularly problematic because it may facilitate other violations such as excessive trading (churning), unsuitable recommendations, or unauthorized trading. While the findings do not indicate Meyer engaged in these additional violations, the lack of proper authorization and supervision creates an environment where such abuses could occur undetected.

Meyer's violations of discretionary trading requirements demonstrate a fundamental failure to comply with basic securities regulations designed to protect customers. Even if Meyer believed he had implicit customer authorization based on general discussions, this does not satisfy the explicit written authorization requirement.

The suspension is in effect from January 5, 2026, through February 16, 2026. During this period, Meyer cannot function in any registered capacity.

For investors, this case highlights the importance of understanding what authority you have granted to your financial professional. Before allowing anyone to trade your account on a discretionary basis, ensure you fully understand what authority you are granting and that all required written authorizations are properly completed and approved by firm management.