Excessive trading is illegal if a financial advisor or broker does it to increase the money they make from commissions instead of making investments that benefit the client. If your advisor has engaged in excessive trading, you’ll want to hire an experienced Ohio excessive trading lawyer.
An attorney can help you take action against the offending financial advisor and obtain compensation for any money you lost due to their actions. Let’s take a closer look at excessive trading, why it’s illegal, and what you can do to recover from investment fraud.
Understanding Why Excessive Trading Is Illegal
When you hire a financial advisor or brokerage firm to help you invest your money, they take on what’s known as a fiduciary duty. This duty requires your advisor to act solely in your best interest. When an advisor engages in excessive trading, also known as churning, they breach the fiduciary duty. This is what makes excessive trading illegal.
Unfortunately, many advisors and brokers engage in this form of investment fraud even though they can face serious repercussions for it. By making a considerable number of trades at once, advisors can dramatically increase their commission fees, making a profit off of trades that are likely not in your best interest to execute.
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How To Recover From Excessive Trading
If you believe you’ve lost money due to excessive trading, you’ll want to hire an attorney and take action against your financial advisor. Seeking compensation for investment fraud can be incredibly difficult, so it’s highly recommended that you work with a skilled lawyer who has experience handling similar cases.
An excessive trading attorney can explain in greater detail why excessive trading is illegal, investigate your investment losses, find evidence of churning, and pursue the compensation you need to make a full financial recovery. Remember, the sooner you get in touch with a lawyer, the sooner they’ll be able to get started on your case and obtain the damages you’re owed.
Churning Cases Are Taken to FINRA Arbitration
When you sign a contract with a financial advisor, it usually includes a clause that states you must resolve any disputes you have with the advisor through arbitration. Arbitration is a process governed by the Financial Industry Regulatory Authority (FINRA) in which both parties involved in the dispute meet with a neutral arbitrator in hopes of working out a resolution.
With help from their attorneys, both parties tell their sides of the story, present evidence, and work to come to an agreement. If you’ve fallen victim to churning, your lawyer will likely take your case to arbitration, where they’ll pursue a resolution that is fair and appropriate based on the misconduct of the broker.
When seeking compensation for churning, you’ll want to find an attorney who has experience taking cases like yours to arbitration. Before you hire a representative, it can be helpful to ask them to look at their client reviews and past case results. These can be a strong indicator as to whether the attorney has the experience to win your case.
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How To Recognize Churning in the Future
Now that you’ve learned how to recuperate your financial losses from illegal excessive trading, you’re probably interested in learning how to spot the signs of churning in the future. One of the main signs of churning is if your account has an annualized turnover ratio in the 3 to 6 range.
Another sign to look out for is a suspicious cost-to-net equity ratio. This ratio shows you how expensive your advisor’s trading strategy is. If your trading strategy is costing you more than it should, you’ll want to investigate further to determine if churning is at play.
There are many indicators that your account might be suffering from churning. Reach out to an attorney if you notice any of the following warning signs:
- Excessive trading activity
- Unsuitable investments
- Poor account performance
- Lack of diversification of investments
- Lack of communication from the broker
- Unexpected fees
A skilled attorney can review your financial records and other documents to determine if your advisor may be churning. If your lawyer suspects that your advisor is engaging in excessive trading to boost their commission, you’ll want to move forward and take action against the dishonest advisor.
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Schedule a Free Consultation With an Excessive Trading Attorney
While it’s true that excessive trading is illegal, it can be hard to pursue compensation for losses caused by churning without the help of a committed attorney. At Meyer Wilson, our firm has over 75 years of combined experience helping investors like yourself take action against dishonest brokers for offenses like churning.
Contact us today to schedule a free consultation with a trusted attorney from our firm. We’ll meet with you to discuss the investment losses you’ve taken on and determine if you have grounds for a legal claim. We look forward to hearing from you soon and fighting to get your hard-earned money back.
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