Unauthorized Investment

An unauthorized investment sounds illegal, but it’s not. That’s an “unauthorized transaction,” or a “nonlegal investment”...big SEC no-no’s.

So what’s an unauthorized investment? It’s an investment that occurs within an organization that isn’t contributing to the goals of that organization.

For instance, a bank may make an unauthorized investment, which would mean the investment doesn’t contribute to the plan set forth by bank managers and approved by bank shareholders.

Unauthorized investments can happen for myriad reasons, but they’re arguably not too common...at least when they aren’t easy to hide. For instance, shareholders can vote to make a change to management if they’re saying one thing and doing another, leading to disappointing returns.