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Losing money due to excessive trading or “churning” can leave you feeling angry, helpless, and even embarrassed. However, you may be able to hold the unscrupulous financial advisor responsible. At Meyer Wilson, our Texas investment fraud lawyers help clients like you seek financial recovery for their investment losses.
With decades of combined experience, our firm has successfully recovered over $350 million for our clients. We’ve taken on some of the largest investment firms nationwide, holding them responsible for their wrongful actions.
Our Texas excessive trading/churning lawyers are committed to helping you recoup your hard-earned money. We operate on a contingency fee basis, so you won’t pay any upfront attorney fees. Contact us today for a free case evaluation.
What Exactly Is Churning?
Churning takes place when a financial advisor trades securities excessively in a client’s account to generate commissions for their own profit. Stock churning and other forms of excessive trading go against the core responsibility of financial professionals to prioritize their clients’ interests.
The U.S. Securities and Exchange Commission (SEC) recognizes churning investments as illegal and unethical since it violates laws intended to safeguard investors. Additionally, the Financial Industry Regulatory Authority (FINRA) has implemented regulations to prevent advisors from engaging in excessive trading.
At Meyer Wilson, our legal team focuses on investment-churning cases and efficiently navigates FINRA arbitration and other dispute resolution methods. Contact us for a complimentary consultation to explore your options further.
How Do Financial Advisors Conceal Churning?
In an effort to conceal churning, financial advisors and the firms that employ them often label the investment objective for brokerage accounts as “speculation” with a “high” or “aggressive” risk tolerance. This designation provides a facade of legitimacy for excessive trading.
When accounts experience frequent trades, brokers and firms justify their actions by asserting that customers willingly accepted the risks and actively sought such trading. However, brokerage firms are obligated to ensure that trading strategies align with the best interests of each client to adhere to securities industry regulations.
Even if an account is classified as speculative or the client has an aggressive risk tolerance, trading excessively goes against the investor’s best interests. No investor knowingly consents to having their account manipulated solely for the benefit of the broker, regardless of their risk tolerance level.
Identifying Churning in Your Account
Brokers may mask churning by maintaining underperforming investments while disposing of profitable ones. This strategy can give the false impression of portfolio growth, concealing the negative effects of frequent commissions and subpar investments.
Are you curious if your broker is engaging in churning within your investment account? Examine your account statements for telltale signs.
Be on the lookout for these red flags of broker misconduct:
- Excessive trading notifications
- High turnover rate
- Lack of communication
- Unexpected fees and commissions
- Lack of diversification
- Unsuitable investments
- Poor performance
If you notice any of these signs, it’s prudent to consult with an attorney who is well-versed in Texas securities fraud laws. One of our excessive trading/churning lawyers serving Texas can evaluate your case during a free consultation.
How Is an Investment Churning Claim Brought to Arbitration?
Investment fraud claims, including churning cases, are commonly resolved through FINRA arbitration, overseen by impartial arbitrators who evaluate evidence and deliver binding judgments.
Key questions for the arbitration panel include:
- Turnover: Is there a high ratio of opening buy transactions to portfolio net worth or equity? This disparity suggests potential churning.
- Control: Who managed the trading activity? Demonstrating your advisor’s influence strengthens your claim.
- Commissions and fees: Were transaction costs disproportionately high compared to potential benefits? Such discrepancies support your case.
- Documentation: Are comprehensive and accurate records available? Account statements and communication logs can serve as vital evidence in your case.
- Breach of fiduciary duty: Did the advisor violate their fiduciary duty? While not all financial professionals have a fiduciary duty, many do.
People often ask why we use FINRA arbitration, which is usually the way we resolve financial misconduct cases. It is preferred because it provides a faster, cost-effective alternative to court litigation.
If you’ve suffered from stock churning or excessive trading, reach out to our Texas churning attorneys serving Texas. Don’t allow unethical practices to go unchecked; you may be entitled to pursue damages.
Free Consultation With a Texas Excessive Trading / Churning Attorney
If you’ve suffered financial losses due to a financial advisor churning stocks or other investments, Meyer Wilson is ready to assist you. With a proven track record of securing financial recoveries for clients across the country, our legal team has the expertise, experience, and resources necessary to help you recover your investment losses.
Our approach involves conducting comprehensive case evaluations and meticulously analyzing your account’s cost-equity ratio and turnover rate to identify signs of financial advisor or broker misconduct. If we uncover evidence of negligence or fraudulent activity, we will aggressively advocate for your financial recovery.
Take the first step towards seeking justice by contacting us for a free consultation.