How can I tell if there is excessive trading or churning in my investment account?
Churning is when a broker engages in excessive buying and selling (i.e., trading) of securities in a customer’s account without considering the customer’s investment goal, and primarily to generate commissions that benefit the broker. Churning is an illegal practice.
There are many warning signs that your financial advisor may be churning your account.
Review your account statements and trade confirmations, and be sure to also check online accounts, for the following:
- Is there any unauthorized trading, or investment purchases that you were unaware of, in your account?
- Are there frequent in-and-out purchases and sales of securities that don’t seem consistent with your investment goals and risk tolerance?
- Are there excessive fees in your accounts?
Investors should be aware that excessive trading or churning can occur even if the overall account value increases. Don’t be afraid to ask your broker or financial advisor questions, since account statements don’t always reflect all the fees.
When you open a brokerage account, your financial advisor should first ask you what your investment objectives or goals are. They are required by law to ask you how much risk you are willing to take. There are different terms to describe the level of risk you are willing to tolerate, such as conservative, income, speculation, and growth. Make sure you communicate with your advisor and have an understanding of what the expectations of your risk levels are.
What if I realize my broker is churning my account?
Often churning or excessive trading occurs when a broker has discretionary authority (either actual or implied) of a client’s account, meaning they do not need the clients consent to trade on their behalf. Churning may result in significant losses and exposes the client to unnecessary tax liabilities.
While there is no quantitative measure for churning fraud, brokers must follow FINRA rules intended to prevent such practices.
The White Law Group continues to file FINRA arbitration cases on behalf of clients who have suffered losses as a result of churning or excessive trading.
If you believe that you have been the victim of churning or excessive trading, please call the securities attorneys of The White Law Group 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on The White Law Group, visit https://whitesecuritieslaw.com.
Tags: broker churning, churn and burn, churning, churning fraud, excessive trades, excessive trading, financial advisor churning, securities fraud attorney, securities fraud lawyer Last modified: May 30, 2018