The failure to execute means that a customer gave their stockbroker or investment professional a specific order to sell a specific security, sometimes at a specific price. Allegations that a stockbroker or investment professional failed to execute a sell order “if the stock goes down,” or “if the time is right,” do not make for valid failure to execute claims. “Could have sold,” or “should have sold,” or “the stockbroker talked me out of it” do not work either.
Limit orders, where a security is to be bought or sold within certain limits, and/or stop loss orders, where an order becomes a market order once the specified price is reached, must be confirmed or held on an exchange or willing market maker under the Rules. However, particularly in times of volatility, market orders are going to be executed in advance of limit orders.
There are nonetheless times where stockbrokers fail to execute customer orders. In one case, a stockbroker accepted a sell order, even though the securities were not delivered (nor were they anticipated to be delivered by settlement date) so his firm would not allow the order to be placed. Once the security arrived, the stockbroker simply forgot to place the order.
Other failure to execute claims may involve the assignment of options coupled with the failure to sell or buy the underlying security upon assignment. The underlying securities may open dramatically up or down following the assignment, and the failure to close the investor’s position can have a catastrophic effect.
Failure to execute claims are often problematic.
Often customers will complain that their broker “refused” to sell the securities in their account, but often on further investigation, one will find that the broker simply recommended that the customer not sell a particular securities, which is most often a matter of judgment and sometimes with the benefit of hindsight, bad judgment, but is not actionable, certainly not as a failure to execute.
Other times, customers will complain that the broker refused to place an order to purchase securities, or refused to purchase additional securities in a margin account. However, this also is often not actionable as the broker has a right to refuse purchase transactions or refuse to continue to extend credit for just about any reason, on margin.
Other times, a customer will place a limit order, and see their security, however so briefly trade through that limit order and then complain that their order was not executed. What most customers do not understand is that in order of preference, particularly on an exchange, market orders are executed before limit orders, and if the price was not there long enough to accommodate the limit order, it may remain unexecuted.
However, sometimes, customers place orders, including limit orders which are never entered or executed because the broker is negligent.
Customers with such complaints need to act quickly, and not complain after receiving months of statements showing that they owned or did not own a particular security, later complain about a failure to execute. Even in cases where there is a bonafide failure to execute the customer’s damages may be limited to the difference in price of the underlying security when they knew, or more importantly, should have known the transaction was not effected.
Damages in failure to execute claims, (or in even supposed “unauthorized execution” claims in connection with typically margin liquidations) are limited to the difference in price of when the order was to be executed, and the price the investor learned (upon the exercise of reasonable diligence or immediately in a self-directed account) that the subject transaction was or was not executed.
Contact Us For A Confidential Evaluation of Your Claim
The Guiliano Law Group has extensive experience representing investors in connection with claims against stockbrokers and investment professionals for the failure to execute, trading errors, and other forms of errors and the failure to execute. If you have suffered damages as the result of the failure to execute, contact us for a free, confidential, no obligation evaluation of your claim at (877) SEC-ATTY. We have a national practice and offer our services on a contingent fee basis, meanin there is no cost or obligation to us, unless we make a recovery for you.