Churning occurs when a broker engages in excessive buying and selling of securities in a customer's account chiefly to generate commissions that benefit the broker. For churning to occur, the broker must exercise control over the investment decisions in the customer's account, such as through a formal written discretionary agreement.
Frequent in-and-out purchases and sales of securities that don't appear necessary to fulfill the customer's investment goals may be evidence of churning.
Churning is illegal and unethical and violates securities laws.
As long as financial advisors are compensated by commissions, the unscrupulous ones will continue to attempt to benefit themselves by excessively trading accounts. When this happens, a FINRA arbitration claim against the financial advisor or the financial advisor's employer is often the best way to recover the damages incurred as a result of the broker's excessive trading.
To Prove a Churning Claim you must provide the following:
Did the client give the broker control of the account?
Is the broker excessively trading the account?
Is the broker excessively trading the account in order to gain commissions?
Churning claims can be complex and sometimes difficult to prove. Brokerage firm almost always hire experience securities defense firms to defend them in these claims.
If you believe that you are the victim of churning by your brokerage firm or financial advisor, it is recommended that you consult with an experienced securities attorney. For a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, visit http://www.churningattorney.com.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.