DEFINITION of 'Stuffing'

The act of selling undesirable securities from the broker-dealer's account to client accounts. Stuffing allows broker-dealer firms to avoid taking losses on securities that are expected to decline in value. Instead, client accounts take the losses. Stuffing can also be used as a means to raise cash quickly when securities are relatively illiquid and difficult to sell in the market.


While stuffing is widely regarded as unethical, it can be difficult to prove whether such transactions constitute fraud. Often, broker-dealers are given the power to buy and sell without client consent for "discretionary" accounts. Furthermore, the legal standard for broker-dealers buying securities for these accounts is "suitability," which can be broadly interpreted. Since discretionary accounts provide so much power to broker-dealers, many financial advisors suggest that customers insist on providing consent for all transactions in their accounts.

  1. Securities Fraud

    A type of serious white-collar crime in which a person or company, ...
  2. Conflict Of Interest

    A situation where a professional, or a corporation, has a vested ...
  3. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  4. Discretionary Account

    An account that allows a broker to buy and sell securities without ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. Brand

    A distinguishing symbol, mark, logo, name, word, sentence or ...
Related Articles
  1. Brokers

    Top Broker Excuses For Poor Investments

    It is not uncommon for investors to lose money through misselling or other forms of mismanagement.
  2. Personal Finance

    Losing Money? Don't Blame Your Broker

    Tempting as it is to pass the buck for your losses, the true culprit may be closer to home.
  3. Brokers

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  4. Personal Finance

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from unscrupulous practices means knowing how to spot them.
  5. Retirement

    Choosing A Compatible Broker

    We go over the factors that determine different investing personalities, and the services that best suit them.
  6. Brokers

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
  7. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  8. Financial Advisors

    SEC Audit? How Financial Advisors Can Be Ready

    Your firm may never be audited by the SEC, but you need to be prepared nonetheless. Follow these tips to make sure you're in compliance and organized.
  9. Investing Basics

    4 Iconic Financial Companies That No Longer Exist

    Learn how poor management, frauds, scandals or mergers wiped out some of the most recognizable brands in the finance industry in the United States.
  10. Active Trading

    What Is A Pyramid Scheme?

    The FTC announced it had opened an official investigation of Herbalife, which has been accused of running a pyramid scheme. But what exactly does that mean?
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  3. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  4. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  5. What are the key differences between pro forma statements and GAAP statements?

    The U.S. generally accepted accounting principles (GAAP) require companies to adhere to uniform reporting standards that ... Read Full Answer >>
  6. Who are the most famous people convicted of insider trading?

    In finance, insider trading refers to the buying and selling of security by a person who has access to material non-public ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center