Fixing Trading Errors

I decided to write this post since I’ve been having some problems with my discount brokerage account.

Many account problems and errors can be fixed by simply pointing them out. Case in point, my discount broker has twice made errors. Once when I was setting up my account for the first time, and now just over the weekend, I see that I hold a phantom position in some unknown security that has also lost it’s entire value. It apparently has a book value of $1.14/share but is currently worthless. This makes my Year-to-date returns look somewhat less appealing than the actual +20% I know I have actually earned.

The first error was corrected simply by pointing out the problem to a service representative. Addressed in but a few minutes. This phantom security position has yet to be addressed because I just found it. I’m pretty sure it will be automatically cleared up on Monday, but am ready to call customer service in the afternoon if it hasn’t.

When working with a full service advisor, human errors can be made when placing trades (either by the advisor or the associate advisor). It’s always important to follow up on your trade instructions and check your confirmation statements when they arrive. Any human errors can be reversed by simply pointing them out to your advisor.

Now, if you run into problems correcting trades you know you did not authorize, you may want to read through the Guide To Effective Investor Complaints.

What you may not know is that in some cases, a trading error can work out in favour of the firm. For example, if you wanted to buy 10 shares of XYZ but your advisor actually bought 100 by mistake, they might sell off 90 shares once the error has been discovered. If XYZ has gone up, the firm pockets the profits. If XYZ has gone down the branch manager might choose to absorb the loss for the broker, or the broker may be on the hook for the loss. It varies by case. In the end, it shouldn’t affect you. So if you have losses in your portoflio due to a processing error, you shouldn’t have to worry – but if you have losses because you picked an investment that went down, well you’ll just have to suck that up!

Preet Banerjee
Preet Banerjee an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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  • Mutuo

    Thanks for your useful information.