Failure to Execute Trades
There is little incentive for a broker not to place an order. However, millions of transactions occur each day and mistakes are made, including failures to place orders. As well, although technology has reduced the possibility, orders do get lost. Investment clients can take action for such negligence by the broker or firm.
At times, a broker does not want to place an order that the client desires. The client may wish to sell a stock but broker is opposed. The issue is whether, at the end of the conversation, the client believes the transaction will take place. If the broker talks the client out of the transaction then it is difficult for the client to seek damages.
If the broker or firm refuses to place an order the client may have a valid complaint. If the order is an “opening” order - a purchase order or short sale - the broker or firm can refuse to take the order (except under certain circumstances). However, if the order is a “closing” order – liquidating a position or covering a short position – the broker or firm should not refuse the order.
Of course, the failure to place the order must result in damages. Example: The broker does not sell and the price drops. In any event, execution failures should be addressed as soon as possible in order to recover losses.
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