Solicited vs. Unsolicited Trades: Understanding the Differences
- What is a solicited trade versus an unsolicited trade?
- “Solicited” trades are initiated by the broker
- “Unsolicited” trades are initiated by the client
- If you didn’t initiate a trade but your broker marks it as “unsolicited,” this is a red flag
It is important to understand the terms “solicited” and “unsolicited” because they have far-reaching implications for suitability claims. When a broker submits an order ticket to buy or sell a stock, the ticket must be marked as either “solicited” or “unsolicited.” Often, trades that are not marked are assumed to be solicited. What’s the difference between an unsolicited and a solicited trade? To put it simply, solicited trades are the broker’s idea, while unsolicited trades are the client’s idea. If you later file a claim against your broker, alleging that they recommended investments that were not suitable given your investment objectives and risk tolerance, the broker-dealer’s defense could be “those trades weren’t your broker’s idea; they were your idea!” Thus, it is of the utmost importance for investors to make sure that all trades are properly marked.
How can you do this? The order ticketing system is used internally by brokerage firms and is not accessible to investors. Investors, however, do receive trade confirmations after a trade has been executed. You should take care to review these statements and check for any unsolicited trades. Make sure that these trades were actually your idea.
This is important because FINRA has identified mismarking as a problem within the securities industry. In FINRA’s 2018 Report on FINRA Examination Findings, under the “Abuse of Authority” section, FINRA states:
Some registered representatives mismarked order tickets to obscure unauthorized discretionary trading by indicating that trades were executed in an unsolicited capacity, when, in fact, customers did not initiate the transactions and were unaware of the trading occurring in their accounts. In other instances, registered representatives mismarked order tickets and placed trades in customer accounts that did not comply with the securities’ threshold limitations or trading restrictions.
Mismarking trades constitutes a violation of FINRA Rule 2010, which demands that registered representatives conduct themselves with high standards of “commercial honor.” Brokers who recommend unsuitable investments may intentionally mark solicited trades as unsolicited to try to insulate themselves from later liability.
If you find yourself in an arbitration proceeding in which a broker is accused of intentionally mismarking an order ticket, “the scale is tipped slightly in favor of the brokerage industry,” according to Brokerage Fraud: What Wall Street Doesn’t Want You to Know by Tracy Pride Stoneman and Douglas J. Schultz, Therefore, you must retain an experienced and knowledgeable securities attorney. If you have questions about unsolicited transactions or your investments in general, please don’t hesitate to contact the securities attorneys of Fitapelli Kurta. Call (877) 238-4175 or email firstname.lastname@example.org.