Securities Lawyers Blog
On July 15, 2014, FINRA suspended Frank N. Dettenrieder, a former financial adviser with First Allied, for twelve days and fined him $5,000 for effectuating discretionary transactions in the accounts of six customers without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary accounts by First Allied in violation of FINRA Rule 2510(b). FINRA Rule 2510(b) disallows registered representatives from exercising discretionary authority in customer accounts without prior written authority.
Under FINRA Rules, financial advisors can either have discretionary accounts – accounts in which the broker has discretion to make purchases without prior approval from the investor – and non-discretionary accounts – accounts in which the broker must obtain prior approval before purchasing securities. In any event, to create a discretionary account the broker must obtain the investors written consent.
FINRA also explained that Mr. Dettenrieder’s conduct violated FINRA Rule 2010. FINRA Rule 2010 requires that all registered representatives “observe high standards of commercial honor and just and equitable principles of trade.”