An unauthorized trade can create immediate uncertainty for a business owner, shareholder, or investor. When a transaction appears in an investment account without clear approval, it may raise questions about who authorized it, what authority was actually granted, and whether the transaction caused financial harm. These disputes can become more complicated when account activity involves business assets, shareholder interests, or a broader disagreement between parties. Understanding the factors that may indicate unauthorized trading can help clarify what happened and what legal options may be available.
Understanding Unauthorized Trading
Unauthorized trading generally involves a securities transaction made without the account holder's permission or beyond the authority that was granted. The issue is not always as simple as determining whether someone had access to an account. The scope of that person's authority, the instructions provided, and the circumstances surrounding the transaction may all be relevant.
For businesses and investors, the transaction may also be connected to a larger dispute involving ownership interests, financial management, or alleged misconduct. Reviewing the underlying agreements and communications can help determine whether the trade was within the authority given.
Key Factors That May Indicate Unauthorized Trading
Several circumstances may warrant closer examination when a transaction appears inconsistent with the authority provided.
No clear authorization: The account holder may have no record of requesting or approving the purchase, sale, or transfer.
Activity outside granted authority: A person may have had limited authority over an account but used that access to conduct transactions beyond the permitted scope.
Inconsistent instructions or records: Emails, account statements, trade confirmations, or other records may conflict with the transaction that was ultimately executed.
These factors do not automatically establish that unauthorized trading occurred. Instead, they can identify areas that deserve further investigation, particularly when the transaction has significant financial or business consequences.
Reviewing Agreements, Account Records, and Communications
Documentation is often central to determining whether a securities transaction was authorized. Account agreements, investment-management documents, corporate records, shareholder agreements, trade confirmations, and communications may help establish the authority given to the person who placed the trade.
The timing of those records can also matter. For example, an instruction given before a transaction may help explain why the trade occurred, while communications that contradict the transaction may raise additional questions. Business owners and shareholders should also consider whether company documents establish who was permitted to make investment decisions involving business assets.
A review should not focus only on the transaction itself. Related trades or financial activity may provide additional context and help determine whether the disputed transaction was an isolated event or part of a larger pattern.
Questions to Ask When a Trade Is Disputed
A careful review can help separate an ordinary disagreement over an investment decision from a potentially unauthorized transaction. Consider these questions:
Who had authority to place the trade? Review account documents and business agreements to determine who could make investment decisions.
What instructions were provided? Identify whether authorization was given verbally, in writing, electronically, or through another documented method.
What financial interests were affected? Determine whether the transaction involved personal investments, company funds, shareholder assets, or another business-related interest.
The answers may reveal whether the dispute involves more than the transaction itself. In some circumstances, questions about unauthorized trading may overlap with allegations of fraud, misuse of assets, breach of fiduciary duties, or other business-related claims.
Preserving Evidence After a Disputed Transaction
Once a potentially unauthorized trade is identified, preserving relevant information can be important. Account statements, transaction confirmations, emails, text messages, agreements, financial records, and other communications may help establish the sequence of events.
It can also be useful to document when the transaction was discovered and what communications followed. Avoid deleting or altering potentially relevant records. If the dispute involves company or shareholder assets, preserving corporate records may be particularly important because those documents can provide additional context about authority and decision-making.
The appropriate response can depend on the circumstances, the agreements governing the account or business relationship, and the nature of the alleged misconduct. Legal counsel can help assess the available information and determine whether negotiation, arbitration, or litigation may be appropriate.
Reviewing Potential Securities Disputes With Legal Counsel
A disputed securities transaction can involve more than an unexplained entry on an account statement. Questions about authorization, ownership, fiduciary duties, financial harm, and the rights of the parties may need to be considered together. For businesses and shareholders, resolving the issue may also require examining related corporate documents and the broader business relationship.
Purdy & Bailey, LLP handles business disputes involving complex financial and legal issues and can help evaluate the circumstances surrounding a potentially unauthorized transaction. If a securities-related dispute has raised concerns about authority, financial losses, or the handling of business assets, contact Purdy & Bailey, LLP at (858) 360-7080 to discuss the circumstances and available legal options.