Churning Losses Recovery
According to the Financial Industry Regulatory Authority Inc. (FINRA), FINRA Arbitrators awarded more than $1 million to a client who alleged account churning by his broker at Legend Securities Inc.
The FINRA panel of three awarded Herbert Voss $700,000 in punitive damages in addition to $375,000 in compensatory damages for a total of $1.075 million, according to FINRA.
The FINRA arbitrators reportedly held Legend Securities and broker Danard Warthen Brown liable for $350,000 in compensatory damages and Brown and Frank Philip Fusco, the firm’s chief compliance officer, liable for $25,000 in compensatory damages.
FINRA expelled Legend Securities from the industry in April 2017, according to FINRA BrokerCheck. Unfortunately, with the firm out of business it may be difficult for Voss to receive his award.
Recovery of Churning Losses
Churning is an illegal and unethical practice that takes place when a broker or financial advisor excessively buys and sells a client’s securities to increase their own commissions. 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.
Churning fraud is any type of trading strategy that could not possibly benefit the client and is clearly implemented by the broker to maximize commissions. If churning is proven, a broker or brokerage firm can be liable for damages a client incurs and potentially also face disciplinary action.
In 2017, 2,848 arbitration cases were filed with FINRA. Of these cases filed, 219 cases involved churning. Excessive trading or churning fraud claims often increase when the market is flat or moving up since clients are more willing to allow their advisor to trade in these types of markets.
If you have suffered churning losses or believe that you have been the victim of excessive trading, you may be able to recover your losses through FINRA Arbitration. 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 and Franklin, Tennessee.
For more information on The White Law Group, visit https://www.whitesecuritieslaw.com.