You rely on your stockbroker or financial advisor to guide you and make the best decisions. Sometimes, these professionals might do things that are taking more risks so they can realize higher commissions and fees.
Churning is the classic example, and it is common throughout the industry. This is when your financial professional encourages you to trade frequently. They talk about how you will make more money by taking advantage of the sudden swings in the markets. They will move you aggressively into and out of different positions to realize higher returns. This is so the broker or financial advisor makes more money in commission and fees. They encourage you to do this and make it seem like a risk-free way to make money.
The reality is that more trading increases the chances that you will experience loss. This is because the commissions, fees, and sudden changes in the markets make it difficult to buy and sell at the right time. Even the most seasoned investors will tell you to take a long-term approach and keep your commissions and fees down.
All financial professionals are supposed to think this way so they can look out for your best interests first. Some will not and focus on making the maximum amount of money they can off of you. This is when churning will become a real possibility. You will see an excessive number of trades. Each time you paid a commission. You didn’t make any money, and the only ones that did were your broker, financial advisor, and the firm.
The Financial Industry Regulatory Authority (FINRA) oversees investment professionals and their firms. It bans churning to prevent investors from experiencing significant losses and to ensure all financial advice is reasonable. This means that your broker or advisors must show that they looked out for your best interests first. Things such as commissions and fees play a secondary role to your interests.
Many times, you will see your investment professional talk about their performance. They might not take into consideration all of the fees and commissions you paid over time. FINRA requires that all investment professionals give you the most accurate information.
The Signs of Churning
Churning can be difficult to spot when it is happening to your account. Investment professionals will hide what is taking place and do trades or use investment products where you don’t see the commission. For instance, many brokers and financial advisors will do what is known as principal trades. This is when they purchase the stock from the firm’s account and sell it to you at a markup such as a half-point. On a trade of 1,000 shares, this is $500 in commissions that you paid to the broker or advisor. When you are selling the position, they can do the same thing and mark you down by three-quarters of a point. This means you paid $750 to sell. If you add up everything, you paid a total of $1,250 in commissions to buy and sell. You sold the position lower than what you paid for it and took a $1,500 loss. This gives you a total loss of $2,750. This is an example of how churning is used to benefit the investment professional. They make money while you take losses.
We have seen brokers and financial advisors use things like private placements, annuities, and mutual funds to do the same thing. They are encouraging you to trade more often and in those areas where you don’t know what you are paying in commissions and fees.
You may see many different signs of churning in your account including:
- A lot of transactions in a short amount of time.
- Your broker or advisor is encouraging you to take losses to get into something similar.
- Your broker tries all the time to convince you to take short-term gains.
- The financial professional has a lot of control over your account.
- High-performing securities are sold fast, and underperforming ones remain in your account.
- You are not getting the total picture of your profits and losses by considering the impact of commissions and fees.
- You see a high turnover in the number of stocks, bonds, and mutual funds bought and sold in your portfolio. There is no reason for this other than to generate higher commissions and fees.
Situations like this are when you need to talk to the churning attorney at the Wolper Law Firm. Our team of churning lawyers understands the securities industry, and we will identify what happened. We can help you to recover the commissions, fees, and losses to your account.
We offer a free consultation and will go over your case. Our firm has a 99% success rate in helping people like you get their money back from churning. The financial markets are volatile, and you need someone on your side that will fight for you. Call our churning lawyer today at 954.406.1231 / 800.931.8452 and let us help you.
Why Choose Us?
Churning can be difficult to prove. Most financial professionals will state that this is what you wanted. You never had a problem with the fees, and everything was going fine until the markets started falling. They will point out how you haven’t lost anything and that you need to ride things out.
These tactics have been used by financial professionals and the firms accused of churning. The big Wall Street firms know this works effectively and that you will face considerable resistance. This is designed to wear you down and to encourage you to take a small settlement to go away. It does not recoup your losses and you need someone on your side that will level the playing field.
The Wolper Law firm has a 99% success rate, and we work with investors like you. Our churning attorneys have the knowledge and experience necessary to go after unscrupulous firms.
Most recently we won a $457,000 award for an investor with big losses. A national brokerage firm was engaged in churning, misrepresentation, and failing to perform due diligence. The case involved high commissions and lots of trading. We recovered the losses, commissions, and the fees they paid. FINRA has clear regulations banning churning, and you need someone on your side that knows the law.
Times like these are when you want to work with a churning lawyer. We are professionals that understand securities law and how to prove churning and excessive trading in your portfolio. Our team has the knowledge and experience to help you to recover the money you lost. This makes a difference in creating successful outcomes for you. We have five-star reviews from our clients for our knowledge, professionalism, and experience.
The Wolper Law Firm was founded on the idea that investors need protection against abusive financial professionals and their firms. We will look at your case and give you objective advice. We will identify churning and use this to help you to get your money back.
We offer a free consultation to discuss your case. You are under no obligation and will get the best solutions that can help you. Churning is an industry-wide practice and you do have rights. One of these is to ensure that your financial professional is not excessively trading your account to generate commissions. Situations like this are when you will see significant losses, and this practice is banned. Contact reliable churning and excessive trading attorneys that can help you at 954.406.1231 / 800.931.8452. We offer a free consultation and will objectively tell you the best available options.
Get the Help You Need Today!
The longer you wait to take action on churning and excessive trading, the worse things will get. The markets are increasingly volatile, and you want to act now to prevent your losses from accelerating. Filing a claim is the first step in the process of recovering these losses. Contact the Wolper Law Firm today at 954.406.1231 / 800.931.8452 and see how we can help you.
Yes, churning is considered to be both unethical and illegal. FINRA bans the practice and will severely punish offenders.
Your broker or financial advisor sees an opportunity to make a nice commission. They will tell you how this particular investment is the right one for you without considering your best interests. The financial professional and the firm make money. You start out with a loss after paying the high commissions and fees.
A principal trade is when the firm will buy stock for its trading account and hold it for a certain amount of time. After the stock is up, they will resell it to customers from their inventory. You are charged a markup that is quoted in fractions or decimals. This states the total commissions you were charged for the trade. Financial professionals like it because they can hide the commissions and charge higher amounts. This is one of the tools they use to keep you in the dark about excessive commissions.
These two make it harder for you to buy long-term investments and realize an increase in the value of your portfolio. Instead, all the profits are used up by paying large commissions. You will also buy and sell positions at the wrong time. This hurts your overall return and the portfolio’s performance.
”Matt exceeded our expectations from start to finish with our claim against a local investment Representative. Matt provided the kind of guidance we were looking for to help win our case. He was easy to speak to and made a difficult process easy. We highly recommend the Wolper Law Firm.” – Kristi Bellefeuille (Google Review)