Misappropriation

Misappropriation can have multiple meanings, but in finance, it usually means that client funds are used in an unauthorized or inappropriate way.

Example

If you give your money to a brokerage firm and a broker at the firm uses the cash to buy a condo for his girlfriend, that is misappropriation. According to FINRA Rule 3070, if the brokerage gets wind of the problem, they must report the issue and take action.