Failure to Execute Trades

Failure to execute trades, also known as a failure to follow directions, occurs when a broker does not execute a trade ordered by an investor. If an investor directs his/her broker to sell or buy a given security and it is not done, the broker can be found in violation of his/her duties to the investor.  A broker can also fail to execute or follow directions by not obtaining the best possible price during an authorized trade, not make the trade in a timely manner, or not carrying out a pre-specified action at the price the client believes it will be.  A broker must use reasonable diligence to see that a customer’s order is executed at the best possible price, given prevailing market conditions.

At times, a broker does not want to place an order or carry out an action that a client desires.  The client may wish to sell a stock, and the broker is opposed.  While a part of a broker’s duty may be to warn clients against particular transactions when there is a legitimate reason to consider them inadvisable, if the investor has reason to believe the order is going to be executed in spite of such recommendations, the broker and the broker’s firm may be liable for damages.  The test is whether, at the end of the conversation, the client believes the transaction will take place.  If the client believes his or her broker will carry out a requested transaction, the failure of the broker to do is a violation their duties towards their client.  A broker must clearly communicate their intended actions with their client.  Failure to execute must result in damages in order for a client to bring a claim against a broker.

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