When your financial advisor is trading your accounts in excess and you suffer losses as a result of this negligence or misconduct, contact a qualified lawyer for help with a churning claim.
You may have trusted that your stockbroker was acting in your best interests when making transactions in your accounts, but unless you gave your permission or fully understood the investments your financial advisor was authorizing, your broker may have acted in bad faith. When this happens, the Financial Industry Regulatory Authority (FINRA) has a solution.
You can initiate a FINRA arbitration complaint and have your case heard. This could provide the opportunity for you to be awarded maximum restitution for your investment losses. You don’t have to go it alone. Get in touch with a respected stockbroker misconduct lawyer at Wolper Law Firm to get more information on your rights.
What Is Churning?
Also commonly known as excessive trading, churning occurs when a stockbroker or financial advisor makes an inordinate number of trades in an investor’s account for their own benefit—usually, in the context of receiving high commissions. As a practice, churning violates securities laws at both the federal and state level. It is considered an abuse and breach of fiduciary responsibility. Generally speaking, excessive trading would include transactions that occurred more than four times within one year.
In discretionary accounts, your broker typically is authorized to make trades at their discretion. But in non-discretionary accounts, your broker will need your authorization before executing a trade.
This is important because if you have a discretionary account it is particularly critical that you keep a close eye on it and review your transactions in detail to ensure that your broker has not taken advantage of you via unauthorized trading.
You may be wondering why a broker would engage in excessive trading, as it is one of the more noticeable signs of misconduct. The truth of the matter is that in many cases, every time a transaction is made in your account, your broker generates a commission, furthering their own financial gains. Trading in excess can often result in considerable investment losses. You may be entitled to full restitution.
Financial Losses Accrued from Churning
For those unfamiliar with investing stocks and bonds, it may not be immediately apparent why churning financial accounts is an abusive practice, or even why it’s damaging to an investor.
When brokers make excessive purchases or sales of securities, the benefit to them comes in the form of commission money earned. As mentioned, each time a security is transacted, they can make money—which is the primary incentive for the illegal practice.
The reality is that churning is not a victimless crime. Although all investing comes with inherent levels of risk, the practice of churning often results in significant financial losses to the investors under the broker’s care. This is because the exaggerated nature of the commissions paid out to the broker makes it more difficult for investors to recover their principal investments, meaning they often fail to break even on an investment.
Making matters worse, it can be difficult for investors to know that brokers are flouting their fiduciary responsibilities by churning their accounts. However, with the help of an experienced attorney with knowledge of illegal churning practices and how to detect them, you can file a claim to recover financial losses from excessive trading.
What to Expect After Filing a Churning Complaint
Once you notice that excessive trading has occurred in your accounts, you should immediately reach out to a lawyer to discuss the details of your churning case. Your lawyer can then request an explanation from your broker and begin the process of initiating a FINRA arbitration complaint.
If FINRA agrees to hear your case, you’ll have the opportunity to present evidence that shows churning occurred. If the arbitrators determine that your broker has engaged in excessive trading, the broker may be ordered to compensate you accordingly.
The good news is that many FINRA arbitration complaints are able to be resolved in around eighteen months, and once a decision has been made, the liable party will often be ordered to repay you within thirty days of the decision.
Meet with a Reputable Lawyer About Your Churning Claim
Are you ready to hold your stockbroker or brokerage firm accountable for their actions? Are you ready to get your money back? If so, get help with your FINRA arbitration complaint by contacting a qualified churning lawyer at Wolper Law Firm. You can reach our office by phone at 800.931.8452 or through the quick contact form included below to schedule your free, no-obligation consultation.