Regulators accuse Andrew Mack of unauthorized trading. The Financial Industry Regulatory Authority (FINRA) entered into a settlement with Mack.
FINRA has rules that prohibit the exercise of a trade without contemporaneous authorization. The only time that a broker or financial advisor may exercise discretion without contemporaneous authorization is when the investor grants such authority in writing.
Regulators accuse that Mack exercised discretion without written authorization in connection with approximately 1,700 trades in the period of 2021 to 2023. The fact that some, if not all, had verbally authorized discretion is immaterial. The lack of written authorization made Mack’s exercise of discretion inappropriate.
According to FINRA, Mack was on a heightened supervision plan for six months during the relevant period. A firm generally institutes a heightened supervision plan when a representative has too many disclosure events, such as lawsuits or bankruptcies, or if there is a specific concern for the actions of the representative. Here, Mack had only one event and that event was a prior allegation of unauthorized trading in 2021 which Mack’s employer settled.
The heightened supervision plan prohibited Mack’s exercise of discretion. In contradiction to the plan, Mack continued to make trades without sufficient authorization. He placed approximately 230 of the discretionary trades without written authorization. This went beyond simple time/price discretion which brokers are allowed to exercise identified under the rule.
Knowledge of what constitutes unauthorized trading is important for investors. This post is made for educational purposes. Contact us with questions about this post.
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