Evanston, IL asked in Stockbroker Fraud for Illinois

Q: How often are brokers supposed to contact clients? Is it mandated in any way?

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1 Lawyer Answer

Alex Schmidt

PREMIUM
Answered
  • Criminal Law Lawyer
  • Cranford, NJ

A: Whether a client needs to be contacted really depends on the context concerning the question. If the investment account is a non-discretionary account then the broker has to contact the client prior to each trade being entered. If the account is a managed account where the broker has received discretionary trading authority from the client there is no requirement to contact the client prior to entering trades or changing a client’s overall asset allocation. This does not mean a broker in a managed account never has to contact the client. If there is a material market event that causes a security in the clients account to sustain market loss an argument could be made that the broker in the managed account has a duty to inform the client of the material event concerning the investment account but this is not set in stone.

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