FINRA’s Department of Enforcement investigated Chiu’s alleged misconduct and determined he executed 162 transactions and exercised discretion in two of his client’s accounts without receiving prior written authorization. According to FINRA, the two customers only provided Chiu with oral authorization to execute the transactions, which is against Merrill Lynch’s policies and financial industry rules and regulations. Further, Chiu executed these trades without Merrill Lynch designating the account as a discretionary account.
Based upon the foregoing misconduct, FINRA alleges Chiu violated NASD Rules 2510(b) and 2010. NASD Rule 2510 prohibits a registered representative from exercising any discretionary authority in a customer’s account unless such customer has provided prior written authorization and the account has been accepted by a FINRA member. Thus, a financial advisor must receive a client’s written authorization prior to executing trades in a customer’s non-discretionary account. When a financial advisor executes unauthorized trades, the financial advisor and brokerage firm may be found liable, as well as disciplined by securities regulators. Here, Chiu executed unauthorized and discretionary trades in non-discretionary accounts thereby violating NASD Rule 2510(b).
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you lost money investing with Chiu through Merrill Lynch, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.