When broker-dealers and investment advisers transact in securities on behalf of investors, they are required to exercise reasonable diligence to ensure the price to the investor is the best possible. This requires the broker-dealer to examine the character of the market for the security, the size and type of the transaction, the number of markets checked, the accessibility of the quote, and the terms and conditions of the order. Trading platforms that receive “payment for order flow” can financially benefit from routing trades to broker-dealers without review of the execution quality, thereby harming investors’ positions. Broker-dealers or investment advisers who fail to fully and promptly execute trade orders in accordance with these principles can be held liable in securities litigation or FINRA arbitration.
Contact Rosenberger + Kawabata to evaluate the recovery of losses caused by a broker’s failure to follow best execution requirements.