FINRA fined and suspended former Morgan Stanley broker David V. Lau of Santa Rosa, CA for exercising discretionary trading authority in a handful of customer accounts without written authorization from either the customers or the firm to exercise such discretion.
Investigators found that in 2020, David Lau (CRD #4567411) executed 194 securities transactions in the Morgan Stanley customer accounts without authorization. As a result, Morgan Stanley terminated Lau in March 2021 based on allegations regarding "compliance with pre trade client confirmation requirement" in accounts the firm deemed non-discretionary.
Just one month after his discharge from Morgan Stanley based on the unauthorized discretion allegations, Lau joined Gladstone Wealth Partners (also of Santa Rosa, California) as an investment adviser representative, setting up a business called Lau Wealth Management beginning in April 2021.
Because discretionary trading allows brokers to conduct trades in investor accounts without obtaining customer permission or even feedback for each transaction, securities regulators have created a series of requirements in order to designate an account as discretionary. Key to opening up an account for discretionary trading is prior written authorization from both the customer and brokerage firm giving the broker permission to make such trades.
When a broker fails to obtain this permission, it opens the door for potential misconduct, such as excessive trading or churning an account, which can lead to increased and unnecessary expenses such as sales charges, commissions, and fees.
In the worst case scenario, such as JP Morgan Securities paying $14 million to settle a customer's complaint that advisor Antoine Souma exercised discretion to make excessive and unsuitable trades in a non-discretionary account, racking up allegations ranging from misrepresentation and suitability violations to constructive fraud that produced significant investment losses.
If you invested with Morgan Stanley broker David Lau or with any broker or financial adviser who exercised discretion without authorization or excessively traded your account without permission, and these unauthorized transactions have proven harmful to your investments or interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.