Item: Shepherd Smith Edwards & Kantas, LLP
Rating: 5
Author: M.B.

The Difference Between Solicited Trades & Unsolicited Trades

Investment trades that stockbrokers make on behalf of customers are either solicited trades or unsolicited trades. The main differences between solicited and unsolicited trades are:

Solicited trades are transactions recommended by the broker to a client.
Unsolicited trades are transactions that the customer has recommended that a financial advisor makes on their behalf.

Why is the Distinction Between Solicited Trades and Unsolicited Trades Important?

If the trade leads to significant investment losses, an investor can more easily hold their broker and broker-dealer liable for a solicited trade.

For example, if you are a retail investor and your financial advisor recommended GPB Capital Holdings private placements — the alternative asset firm is now accused of operating a more than $1.8B Ponzi scam — then these were solicited trades suggested by your registered representative. Over 17,000 investors have lost money in this scheme and thousands have filed FINRA arbitration cases against their brokerage firms to recover damages.

However, if you are a retiree with a conservative risk tolerance level and you are the one who asked your broker to trade in oil and gas investments for you, then those were unsolicited transactions. Even if you lost money when energy prices plunged during COVID-19, getting a FINRA arbitration panel to hold your financial advisor accountable could prove more challenging.

FINRA Rule 2010 and the Importance of Correctly Marking Trades

Under FINRA Rule 2010, Standards of Commerical Honor and Principles of Trade, registered representatives have a duty to correctly report and mark all transactions. This means accurately indicating whether a trade is a solicited transaction or an unsolicited one.

Noting the type of trade on the transaction ticket is important not just for proper recordkeeping, but also in the event a dispute arises between you and your broker as to which kind of trade was made and/or there were investment losses.

Unfortunately, financial advisors can incorrectly mark a transaction as unsolicited when, in fact, it was a solicited trade. There are also registered representatives who will purposely mismark a solicited trade as an unsolicited transaction to escape future liability. This can prove detrimental to an investor seeking to recover damages for unreasonable losses caused by the transaction.

FINRA’s 2018 Examination Findings Report notes that there are brokers who will mark trades that they made without a customer’s knowledge or permission as unsolicited transactions. There are financial advisors who will incorrectly mark a trade made in a customer’s account as “unsolicited” because the transaction didn’t follow trading requirements or threshold limits. If you noticed that your broker mismarked a solicited trade, you should notify the brokerage firm right away.

Unsuitability and FINRA Rule 2111

Whether a trade was solicited by your broker or unsolicited at your request could make a difference in the outcome of your FINRA arbitration case, especially if the investment proved to be unsuitable for your investing profile or risk tolerance level. Under FINRA Rule 2111, brokers are required to make sure that any trade, investing strategy, or financial product that they recommend is suitable for a customer given their investing profile and risk tolerance level.

If a solicited trade by your financial advisor proved unsuitable for you and caused you significant losses, this only increases your chances of either a FINRA arbitration panel granting you an award for damages or a broker-dealer negotiating a settlement to compensate you for your losses.

Experienced Broker Fraud Lawyers

Regardless of whether your losses are a result of a solicited trade or an unsolicited trade, this is not the type of investor fraud case that you want to pursue without experienced legal help.

Shepherd Smith Edwards and Kantas (SSEK Law Firm) represents retail investors, retirees, seniors, high-net-worth individual investors, ultra-high-net-worth individual investors, and institutional clients in their FINRA claims for broker fraud or negligence. We have recovered many millions of dollars for investors.

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