Asset Management Expert Discusses Unauthorized Trades by Broker


Securities Expert WitnessThis case involves alleged securities fraud and breach in fiduciary duty in Oregon. The plaintiff was an investor who was working with a broker. The broker was managing a substantial fund, but had begun to move forward with unauthorized trades into highly speculative investments, disregarding her client’s risk tolerance. Over the course of several years, the broker continued speculative and unauthorized trading. During her tenure as a broker, she allegedly allowed a wave of options to expire with no value whatsoever. The broker did not advise the investor of those positions or to liquidate at a loss to retain some of the value.

Question(s) For Expert Witness

  • 1. Do you have familiarity with the subject matter described above?
  • 2. Have you ever published or lectured on this subject?
  • 3. What are the fiduciary duties of the broker and brokerage firm in this instance?
  • 4. What measure could have been in place to prevent the outcome?

Expert Witness Response E-010297

Expert-ID: E-010297

I am an Approved FINRA Dispute Resolution Arbitrator and a Chartered Financial Analyst, and I have held the following NASD/FINRA securities licenses: Series 7 General Securities Representative; Series 55 Equity Trader Representative and Series 63 New York Uniform Agent. By statute, the broker and brokerage are subject to a suitability standard, which definitely applies. By common law, they are subject to a fiduciary standard. A few questions that may impact this case include the following: (1) were all the trade tickets sent to the client? (2) were account statements sent on a regular basis? and (3) were there failures in the brokerage firm’s compliance procedures that failed to catch unauthorized trading and breaches of account guidelines and the denoted risk profile of account?

Expert Witness Response E-000635

I have served as an expert witness on over 250 matters, many of which are similar to the matter herein. I have published and lectured on this subject/issue; I am the External Commentator for “Prudent Practices of Investment Advisors.” The issues here appear to be unauthorized trading, unsuitable investments, improper loan solicitation, and lack of supervision. Measures that should have been in place would include firm supervision, which could have prevented the mistakes made by this broker from occurring. I have over 40 years experience as an investment professional. My qualifications include having the professional designations of Accredited Investment Fiduciary Analyst and Certified Fraud Examiner (CFE), which addresses very specifically the issues of breach of fiduciary duty and securities fraud. Over the past several years, I have analyzed over 150 portfolios to see if these portfolios are compliant with fiduciary standards.

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