Unauthorized Investments A. most common situations 1. making trades in a nondiscretionary account without getting authorization. Confirmation slip does not provide absolute protection. 2. making trades inconsistent with instructions. Customer may not know that specific trade is inconsistent with wishes previously expressed. 3. making trades on margin in a nonmargin account 4. trading in options or futures where the account opening documents do not authorize it B. damages.
Customer can rescind the trade.
Churning A. elements 1. control of the account a. formal b. de facto 2. A single trade, if it is motivated by a desire to generate a commission, can be excessive C. most common situations 1. high turnover. Some ratios are presumed to be excessive 2. switching mutual funds without a good reason 3. Client can recover the commissions. E. how to avoid problems.