Losing money to excessive trading or “churning” can be devastating, leaving you feeling angry and worried about the future. Fortunately, you have the right to hold unscrupulous investors accountable for their actions. A Louisiana investment fraud lawyer from Meyer Wilson can help you seek justice.
With decades of collective experience, our firm has recovered over $350 million for our clients, holding some of the largest investment firms in the nation accountable for their misconduct. Our Louisiana excessive trading/churning lawyers are here to help you recover your investment losses.
We don’t charge upfront retainers and only get paid when we win your case. Reach out to us by phone or via the online contact form for a free case evaluation.
What Is Churning?
Churning refers to the unethical practice where a broker excessively trades stocks or other securities in a client’s account to generate commissions for their own gain. This activity violates the fundamental duty of financial experts to prioritize their clients’ interests over their own.
The U.S. Securities and Exchange Commission (SEC) deems churning illegal and unethical, as it breaches various laws designed to protect investors. Additionally, the Financial Industry Regulatory Authority (FINRA) has established rules to curb excessive trading by brokers.
At Meyer Wilson, our attorneys are well-versed in investment churning/churning investments and are ready to guide you through FINRA arbitration or another appropriate means of resolution. Learn more during a free consultation.
How do Brokers Try to Cover Up Churning?
To conceal churning, financial advisors and firms often designate the investment objective for the brokerage account as “speculation” with a “high” or “aggressive” risk tolerance.
Then, when the account undergoes excessive trading, brokers and firms justify their actions by claiming that the customer accepted these risks and actively sought such trading. However, brokerage firms must demonstrate that suggested trading strategies serve the best interests of each customer to comply with securities industry regulations.
Even if an account is labeled as speculative or the customer has an aggressive risk tolerance, clear instances of churning indicate activities contrary to the investor’s best interests. No investor consents to their account being manipulated solely for the broker’s profit, irrespective of their risk tolerance.
How Can You Tell if Your Account Is Being Churned?
Wondering if your broker is churning stocks or other securities in your investment account? Look over your account statements for telltale signs.
Brokers may conceal churning by retaining poorly performing investments while offloading profitable ones. This tactic can create the illusion of portfolio growth, masking the detrimental impact of frequent commissions and subpar investments.
Watch out for the following indicators of broker misconduct:
- Excessive trading activity
- Lack of communication
- High turnover rate
- Unexpected fees and commissions
- Unsuitable investments
- Lack of diversification
- Poor performance
If you spot any of these warning signs, seek assistance from an excessive trading/churning attorney serving Louisiana to safeguard your financial well-being.
How do Your Lawyers Prove Excessive Trading Took Place?
Meyer Wilson collaborates with top experts in the industry to scrutinize your portfolio for signs of excessive trading. We also prepare every case for a possible trial from day one—not just to settle.
Our lawyers establish excessive trading through careful analysis of two key metrics:
- The account’s break-even or cost-equity ratio: This reflects the annual expenses incurred from an investment strategy.
- The annual turnover rate: This reflects the total yearly purchases divided by the average balance of the account. An annualized turnover ratio exceeding 4 is commonly considered excessive.
Our thorough approach has allowed us to achieve impressive case results for our clients.
How Is a Churning Claim Brought to Arbitration?
Most negligence and fraud claims are resolved through FINRA arbitration. This process entails a neutral panel of arbitrators who assess evidence, hear arguments, and render binding decisions on disputes.
You may be wondering why FINRA arbitration is usually the preferred resolution method. FINRA arbitration, known for its efficiency and financial focus, offers a quicker and more cost-effective alternative to court proceedings.
What does the arbitration panel consider before reaching a verdict?
- Turnover: Is the dollar amount of opening buy transactions compared to the average net worth or equity of the portfolio? A high ratio indicates potential churning.
- Control: Who controlled the trading activity in your account? Demonstrating that your advisor directed the buying and selling decisions strengthens your arbitration claim.
- Commissions and fees: Were the transaction costs disproportionately high compared to the potential benefits of the trades? Such disparity could strengthen your case.
- Documentation: Are comprehensive records available and accurate? Account statements, communication logs with the broker, and documentation of investment discussions serve as crucial evidence in arbitration.
- Breach of fiduciary duty: Did the advisor breach their fiduciary duty according to Louisiana law? While not all financial advisors have a fiduciary duty, some do.
Whether you’ve been a victim of stock churning or other excessive trading, our team is here to help. Don’t let an unscrupulous advisor get away with churning. If they lost your money through illegal practices, you may be eligible to pursue financial compensation.
Talk to an Excessive Trading / Churning Lawyer Serving Louisiana
If a financial advisor’s excessive trading/churning caused you to lose money, Meyer Wilson is here to help. With a track record of securing hundreds of millions of dollars for clients nationwide, our attorneys have the skills, experience, and resources to reclaim your investment losses.
As we mentioned, our team conducts thorough case assessments, examining your account’s cost-equity ratio and turnover rate to detect any indications of broker misconduct. Should we uncover negligence or fraudulent behavior, we will work tirelessly to win the financial recovery you deserve.
Contact us today for a free consultation.