Unauthorized Investment Account Trades: Harold Geller Comments in The Globe and Mail
When should an investment dealer intervene when unusual or potentially unauthorized trades occur in an investor's account?
Harold Geller recently spoke with The Globe and Mail about that question following reports of a second TD Direct Investing customer alleging significant losses from unauthorized trades involving a volatile stock.
According to The Globe and Mail, the investor alleges that scammers gained access to his account, sold approximately $234,000 of his existing investments and purchased nearly $355,000 in shares of a little-known Chinese company. The investor says he was left with a loss of approximately $93,000.
The report follows an earlier case involving another TD Direct Investing customer who alleges that unauthorized transactions were used to purchase more than $5 million of the same security, resulting in losses of approximately $4.5 million. TD has denied liability in that proceeding, and the allegations have not been tested in court.
When should an investment dealer intervene?
For investors, unauthorized trading in an investment account can raise questions that go beyond how access to the account was obtained. Depending on the circumstances, questions may also arise about unusual transaction activity, verification of trading instructions and the steps taken by an investment dealer after suspicious activity is identified.
Speaking with The Globe and Mail, Harold noted that investment dealers often have authority to delay trades to verify the legitimacy of an investor's instructions. At the same time, delaying a transaction can create its own risks in a rapidly moving market.
Harold also noted that current regulations provide little guidance about when a financial institution should reasonably be expected to pause an unusual trade to protect an investor's account from fraud.
What should investors do if they discover unauthorized trades?
An investor who discovers potentially unauthorized activity should contact their investment dealer or financial institution promptly and document what has occurred. Account statements, transaction records, communications with the dealer and records relating to access to the account should be preserved.
Where unauthorized trading has resulted in a significant financial loss, an investor may also wish to obtain legal advice about the circumstances of the transactions and their rights.
About Harold Geller
Harold Geller is a Partner at Sotos LLP and leads the Sotos Investor Protection Group. He has assisted more than 1,500 investors and represents individuals who have suffered significant financial losses.
Sotos Investor Protection Group represents investors in disputes involving investment dealers, financial institutions and investment advisors, including matters involving unsuitable investments, complex or high-risk investment strategies, liquidity restrictions and other circumstances resulting in significant investment losses.
Read the full article in The Globe and Mail: “Second TD investor alleges fraudulent trades involving obscure Chinese stock.”
If you have suffered significant investment losses and have questions about your legal rights, contact Harold Geller at hgeller@sotos.ca or 416.863.5603, or Matthew W. Taylor at mtaylor@sotos.ca or 416.572.7315.