Churning is a form of financial misconduct that can affect investors in Michigan. Also known as excessive trading, churning generates commissions for the financial advisor without benefiting the investor. Unfortunately, many investors lose large amounts of money due to churning.
If you or someone in your family suffered serious economic losses due to account churning or excessive trading, please contact a Michigan investment fraud lawyer at Meyer Wilson. We handle cases on a contingency basis, so you’ll pay nothing upfront for our services.
Our award-winning law firm exclusively handles investor claims and class actions, and we may be able to secure financial compensation for your losses. Reach out to us today for a free consultation with a Michigan excessive trading/churning lawyer.
Defining Churning in Michigan
Churning is an industry term for excessive trading. It occurs when a securities broker trades on a client’s account to generate commissions rather than to benefit the client with suitable trades.
Investment churning violates U.S. Securities and Exchange Commission (SEC) Rule 15c1-7. It is an illegal type of broker/financial advisor misconduct that could lead to significant losses for the investor.
Signs Your Financial Advisor Is Churning Investments
You might be able to tell an advisor (or other financial professional) is churning your investment account by watching for these red flags:
- Unsuitable investments
- Lack of diversification
- Unusually frequent notifications of trading in your account
- Excessive confirmation forms for transactions
- Lack of documentation regarding an investment
- A declining account in an upward-moving market
- An account that is declining too swiftly in a downward-moving market
Any suspicious activity on your account or by your financial advisor could be a red flag for excessive or unauthorized trading or other misconduct. If you notice signs of churning, speak to an investment fraud attorney at Meyer Wilson right away. Immediate legal action could prevent further investment losses.
We understand these situations can be awkward, but you deserve to recoup your losses. Our Michigan broker misconduct lawyers can help you stand up to an unscrupulous financial advisor, stockbroker, or brokerage firm.
How Unscrupulous Financial Advisors Exploit Investors Through Churning
Financial advisors who engage in investment/stock churning exploit their clients through unethical conduct, leading to significant financial harm.
According to the U.S. Securities and Exchange Commission (SEC), investment churning is not only unethical but also illegal, carrying civil penalties. The SEC defines it as the fraudulent practice of excessively buying or selling securities by financial professionals, which is deemed fraudulent when not in the client’s best interests.
Although advisors are expected to trade securities and other investment products to benefit their clients, engaging in excessive trading solely for commissions is considered misconduct. Churning occurs when those responsible for making investment decisions within a client’s account excessively trade solely for their own financial gain.
Elements Necessary to Prove a Churning Claim
During a civil claim against a financial professional for churning, the burden of proof will rest with your side of the case—the plaintiff’s side. Hiring one of our churning attorneys serving Michigan could help you with the burden of proof.
Our legal team knows how to collect evidence, hire expert witnesses, and take other steps to prove the necessary elements for a claim.
These elements include:
- Control of the account: First, the advisor must have had control over your investment account at the time of the excessive trading. The advisor must have been responsible for trading, not you. This could mean express or implied control.
- Excessive or unreasonable trading: Second, the investor must be guilty of excessive or unreasonable trading, according to what would be suitable for you and your account. If a reasonable and prudent advisor would not have made the same trades, the advisor may be guilty of churning.
- Scienter: Finally, your lawyer must demonstrate the advisor’s intent to churn your account. Evidence must be present proving the advisor intentionally defrauded you or committed excessive trading with a blatant disregard for your investment objectives.
These cases are complex and nuanced. For example, not all financial advisors have a fiduciary duty, but some do. Our team leaves no stone unturned when gathering evidence of financial misconduct.
Using the Turnover Ratio to Prove an Advisor is Churning Your Investments
A Michigan excessive trading/churning attorney from our firm could help you prove your case by analyzing factors such as turnover ratio. This is the total amount of purchases your financial advisor made in your account, divided by the account’s average monthly equity.
Annualizing this ratio will give a reasonable number of trades for the specific investor. An amount much higher than this number could be evidence of churning.
Choosing a Michigan Excessive Trading / Churning Lawyer
When seeking legal counsel for an investment fraud case in Michigan, several factors warrant consideration:
- Experience: Begin by looking for an experienced attorney with proficiency in handling investment and securities fraud cases. A successful track record in securities litigation, along with a deep understanding of pertinent regulations, is crucial for effective representation.
- Reputation: Equally important is the lawyer’s reputation and credibility, which can be gauged through research into their education, past cases, and client feedback. A lawyer with a stellar reputation in the legal community and positive reviews is more likely to provide strong representation.
- Communication: Assess the lawyer’s communication style and accessibility. Clear and responsive communication fosters transparency and trust—a cornerstone of a healthy attorney-client relationship.
- Fee structure: Understand the lawyer’s fee arrangement before signing anything. While cost shouldn’t be the sole factor, it’s essential to balance affordability with your legal needs. Our law firm operates on a contingency fee basis, ensuring payment only upon successful resolution. We’ll discuss our percentage during your risk-free consultation.
How We Stand Out from Our Competitors
In addition to our experience, reputation, and responsiveness, our law firm is unique in the following ways:
- Our team has access to vast resources that could be invaluable to your claim. We have strong connections with expert witnesses, mediators, and state and federal securities regulators nationwide.
- Our lawyers have been representing clients in investment fraud claims for over 20 years. Our success rate is more than 98%, and we have won over $350 million in settlements and judgment awards for past clients.
Don’t Wait too Long to Take Action: Contact an Attorney Today
If you suspect that churning caused the financial losses in your account, please do not hesitate to contact us. An attorney from Meyer Wilson may be able to help you file a claim for damages.
Our team of excessive trading and churning lawyers serving Michigan is dedicated to combating these fraudulent practices and supporting victims through the arbitration process or civil litigation. If you’ve been affected, we stand ready to assist you.
Take the first step toward reclaiming your future by contacting us for a free consultation.