Churning occurs when a stockbroker or financial advisor engages in excessive trading in a client’s account for the purpose of generating commissions for himself or the brokerage firm, as opposed to trading in a manner that is suitable for the client. When stockbrokers engage in activity that is done to benefit themselves to the detriment of the client, it is a violation of the stockbroker’s fundamental fiduciary duty to put the investor’s interests first. Churning is illegal and often it makes it impossible for the client’s account to be profitable.
Many stockbrokers engage in churning by buying and selling securities for the primary purpose of generating commissions. In some instances, churning is often accomplished by selling off profitable securities while holding onto investments that are poor performers. In this way, it appears that the investor’s account is doing well based on the gains made from these sales. In reality, the investor is losing money due to the cost of excessive commissions and a portfolio filled with unsuitable and other bad investments.
If you believe your investment portfolio has been churned, that your stockbroker is incurring excessive commissions in your accounts, or that your stockbroker is acting in an unethical or illegal manner, contact Levin Law for experienced legal advice and assistance to help you recover your losses.
Pursuant to both state law and rules governing the securities industry, investment recommendations and trading strategies must be suitable for investors. Even if you have a high-risk tolerance, excessive trading is not a beneficial or acceptable strategy because by its nature, it is unsuitable for you. It is not in your best interests and often places your financial advisor’s interest ahead of yours.
Our Churning and Excessive Trading Attorneys have represented clients throughout the United States and the rest of the world in all types of stockbroker misconduct and other securities industry cases. We have recovered over $50 million in financial recoveries for defrauded investors throughout the world. As trial lawyers, we are well-versed in securities fraud litigation and FINRA arbitration.