Have you suffered financial losses due to excessive trading or churning?
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.
What is excessive trading or churning?
When a broker engages in excessive trading of securities in a customer’s account without considering the client’s investment goals and primarily to generate commissions that benefit the broker, the broker may be engaged in an illegal practice known as churning.
Churning fraud is an illegal and unethical practice. The more a broker trades the more they get paid. In many cases this is enough incentive for unscrupulous brokers to over-trade in a client’s account.
Often churning fraud 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.
FINRA Cracks down on Excessive Trading in 2021
According to Christopher Kelly, FINRA’s deputy head of enforcement, there will be more cases through 2021 brought by FINRA for excessive trading, and also against firms for failing to supervise., at a Practising Law Institute conference on broker-dealer regulation.
Kelly, who spoke at a Practising Law Institute conference on broker-dealer regulation last week, said that there will be more cases brought by FINRA for excessive trading, and also against firms for failing to supervise through 2021.
Regulation Best Interest, or Reg BI, a 2019 Securities and Exchange Commission (SEC) rule requires that a broker/dealer and its associated persons must always act in the best interest of their retail customers when recommending securities or investment strategies involving securities.
In the past, for FINRA to prove excessive trading, the regulator had to prove the trading was excessive and unsuitable, and also that the broker controlled the trading.
With the Reg BI, this is no longer necessary.
How can I tell if there is excessive trading or churning in my investment account?
You can check for 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?
In order to spot excessive trading, regulators look at the cost-to-equity ratio, which reflects the percentage of return on a customer’s average net equity that is needed to cover commissions and other trading expenses, according to the article.
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.
Free Consultation with a Securities Attorney
If you believe that you have been the victim excessive trading or churning, 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. For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.
