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

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  2. Conflict Of Interest

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  3. Broker-Dealer

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

    1. An individual or firm that charges a fee or commission for ...
  5. Discretionary Account

    An account that allows a broker to buy and sell securities without ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
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