Churning is a securities industry term for excessive trading on an investment account. While frequent trades could be beneficial to a portfolio in limited situations, the trades should be reasonable and done with the investor’s best interests in mind. When unscrupulous financial advisors engage in churning, it can be devastating to an investor’s portfolio.
If you believe you’ve been the victim of churning or excessive trading in Ohio, reach out to Meyer Wilson about pursuing financial compensation. Our Ohio investment fraud lawyers are here to explain your legal options and guide you through your next steps.
Understanding Excessive Trading or Churning
Churning occurs when a financial advisor makes excessive trades on an investor’s account solely to generate commissions. This practice can result in unnecessary fees and expenses for the investor, as well as potential tax consequences.
Trading excessively on an account can lead to financial losses for the investor but gains for the fraudulent advisor, who makes money on each trade in commissions and fees.
Why You May Need an Excessive Trading / Churning Lawyer in Ohio
Churning on your account could cost you thousands of dollars in investment losses before you recognize you have been a victim of fraud. You deserve legal representation in a case involving significant economic losses that could jeopardize you or your family’s future.
Hiring an experienced securities lawyer can be the best way to protect your rights and interests when going up against a financial advisor or broker in pursuit of damages for fraud or misconduct.
Your investment and securities attorney can prevent the defendant from taking advantage of you or undervaluing your losses. Your Ohio financial advisor negligence lawyer can also take care of complicated legal processes and nuanced securities laws while you focus on healing.
How Churning Investments Can Hurt an Account
When a broker buys and sells securities, this person often generates commissions and fees for the service. While buying and selling securities are normal practices that could benefit the investor, it is the advisor’s legal duty to only do so when it is in the interests of their client’s investment objectives.
Trading on a client’s account that is excessive or unreasonable is a form of advisor or broker misconduct. Doing so intentionally to make a profit on commissions is churning, an unethical and illegal practice in Ohio.
Detecting Churning
You might notice churning if you receive an unusual number of statements or notifications that your financial advisor has bought or sold securities. An excessive amount of trading will exceed the average turnover ratio.
The turnover ratio is the product of the total annual purchases made on your account and the average monthly balance in your account. If this equation brings an annualized turnover rate too high, you could be a victim of churning. A low rate could also be excessive trading if it is more than what is reasonable for your account and investment goals.
Our Ohio excessive trading lawyers are nationwide leaders in investment fraud cases and are well-versed in Ohio state laws regarding securities.
How Financial Advisors and Brokerage Firms Hide Churning
Financial advisors and their firms employ deceptive methods to conceal churning stocks or other investments. They may categorize the brokerage account’s investment strategy as “speculative” and tailored to an “aggressive” risk tolerance.
They will then manipulate trades to appear in line with the client’s investment objectives, aiming to rationalize their actions and assert client consent to speculative trading. Despite the façade, advisors and brokerage firms bear a legal responsibility to prioritize investor interests and adhere to securities regulations.
Even if clients express a tolerance for high-risk investments, thorough investigations may reveal activities that go against their best interests. If you suspect churning, you have the right to pursue damages from the unscrupulous advisor. Our excessive trading/churning attorney in Ohio are here to help.
Identifying Signs of Churning in Your Investment Portfolio
Curious about potential churning by your advisor? Scrutinize your account statements for key indicators.
Advisors may mask stock churning by retaining underperforming stocks while offloading profitable ones. This tactic can misleadingly portray portfolio growth, masking the negative impact of frequent commissions and unsuitable investments.
Keep an eye out for these unmistakable signs of advisor impropriety:
- Excessive trading activity
- Limited communication
- Unsuitable investment recommendations
- High turnover rate
- Lack of diversification
- Poor performance
- Unexpected fees
- Excessive commissions
Should any of these red flags arise, seek advice from our churning attorneys in Ohio.
Is Stock Churning or Investment Churning a Form of Fraud?
Churning warrants legal attention if detected in your account. As we mentioned, this practice involves financial professionals excessively buying and selling securities to generate profits, primarily benefiting themselves through commissions and additional fees.
Unfortunately, many advisors engage in this unethical behavior. The consequences of churning can be severe, leading to significant financial losses for investors while advisors reap profits from the trades. If you suspect your financial professional is engaging in excessive trading, seek legal counsel as soon as possible.
An Attorney Can Help
By involving an attorney early on, you can protect your rights and potentially recover losses incurred due to churning.
If you’re uncertain whether you’re a victim of churning, consulting with a lawyer experienced in investment fraud can provide clarity. They can evaluate your situation and identify signs of churning, guiding you on the appropriate course of action.
Filing a Claim for Churning in Ohio
The civil justice system in Ohio says you may bring a claim against someone if that party negligently or intentionally caused you harm, including economic losses.
If a financial advisor or stockbroker churned your account and lost your money, you may have grounds to file a lawsuit or securities arbitration case against the individual or firm seeking compensation for the full amount of your losses.
In Ohio, you must bring a fraud claim within the applicable time limits, which depend on the circumstances. An Ohio excessive trading/churning lawyer can evaluate your case and inform you of specific deadlines.
Understanding FINRA Arbitration
In FINRA arbitration, most negligence and fraud claims find a resolution. This process involves impartial arbitrators who review evidence, listen to arguments, and issue binding decisions.
Why opt for FINRA arbitration? Known for its expediency and financial focus, it provides a swifter and more cost-effective alternative to court proceedings.
Key considerations for the arbitration panel:
- Turnover: Does the ratio of opening buy transactions to portfolio net worth or equity indicate a significant imbalance? This discrepancy may indicate potential churning.
- Control: Who oversaw the trading activities? Demonstrating the level of your advisor’s involvement can bolster your claim and shed light on the management of your investments.
- Commissions and fees: Were the transaction costs disproportionately high relative to the potential benefits? Such disparities can provide support for your case and highlight possible exploitation.
- Documentation: Are there comprehensive and accurate records available? Account statements and communication logs serve as crucial evidence, offering insights into trading activities and communications.
- Breach of fiduciary duty: Did the advisor breach their fiduciary duty? While not all financial professionals have fiduciary obligations, many do, and any violations should be thoroughly examined and addressed.
If you’ve suffered from stock churning or excessive trading, our team is ready to assist you. If you’ve incurred losses due to illegal practices, you might qualify for financial compensation.
Navigating the Arbitration Journey
While some cases are resolved pre-arbitration, most necessitate this additional step to pursue a favorable outcome. Should your case proceed to arbitration, the verdict won’t rest with a jury but with a selected panel of arbitrators selected to your matter.
Throughout arbitration, both parties will articulate their opening statements, provide evidence and testimonies from witnesses, and deliver closing arguments to the arbitrators. After careful consideration of all the presented information, the arbitrators will reach a decision.
The arbitration process typically lasts three to five days, though intricate cases might extend for weeks. Regardless of your case’s complexity, trust our Ohio churning lawyers to diligently advocate for your interests and increase the chance of the arbitrator’s final ruling aligning with your needs.
Other Forms of Misconduct to Watch Out For
Unscrupulous advisors are creative and will devise all kinds of ways to pad their pockets. We represent clients in various investment misconduct claims.
Here are some common issues we handle:
- Breach of fiduciary duty
- Unsuitability
- Asset allocation
- Failure to supervise
- Negligence
- Unauthorized trading
If you’ve lost money due to any deceptive financial practice, don’t hesitate to contact us for legal assistance. We’re here to help you explore your options and seek the justice you deserve.
What to Look for in an Ohio Churning Lawyer
When selecting legal counsel for your investment fraud case in Ohio, there are several critical factors to consider:
- Experience: Evaluate the attorney’s background and expertise in handling investment fraud cases. A proven track record in this area of law, combined with a comprehensive understanding of relevant regulations, is essential for effective representation.
- Reputation: Investigate the lawyer’s standing and credibility within the legal community. Review their educational background, past cases, and client testimonials to gauge their reputation. An attorney with a solid reputation in the industry and positive client testimonials is more likely to provide excellent representation.
- Communication: Consider the lawyer’s communication style and accessibility. Clear communication and responsiveness to client inquiries foster trust and transparency, allowing a productive attorney-client relationship.
- Fee Structure: Understand the attorney’s fee arrangement. While cost should not be the sole determining factor in your decision, it’s crucial to balance it with the level of legal service needed.
Our firm operates on a contingency fee basis, meaning that you only pay us our attorney fee if we secure a favorable outcome for your case. We will discuss the specifics of our fee structure during your free consultation.
Why Choose Our Law Firm?
When confronted with churning, selecting a qualified attorney is the most straightforward path to seeking compensation. Our Ohio excessive churning lawyers have years of experience advocating for victims of investment fraud and are ready to put their skills to work in your case.
Here’s what sets us apart:
- Decades of success: With over two decades dedicated to aiding clients in recouping losses from advisor misconduct, our track record of successful case results speaks volumes.
- High success rate: Our attorneys take pride in their success rate of over 98%, securing over $350 million in total for our valued clients.
- Extensive resources: Meyer Wilson has the resources needed to combat advisor churning. Strategic alliances with mediators, securities regulators, and expert witnesses throughout Ohio support our legal strategies.
- Contingency fee basis: We operate on a contingency fee basis, charging fees only upon securing you a financial award. This aligns our interests with yours.
- Recognized excellence: U.S. News ranked our firm among the Best Lawyers in America, which underscores our commitment to excellence.
- Ohio presence: With Ohio offices in Cleveland and Columbus, our legal team serves clients across Ohio, and throughout the country. Regardless of your location within the state, we are equipped to offer the representation you need. Additionally, we are flexible and may arrange to meet you for a free consultation at a location convenient for you.
Count on our team for unwavering support. From explaining your legal options and gathering evidence to representing you in FINRA arbitration or court, we provide comprehensive legal representation.
Time Is of the Essence in Securities Fraud Cases
The statute of limitations determines the timeframe within which a plaintiff can initiate a legal claim. Each state, including Ohio, has its own statute of limitations for investment fraud cases, highlighting the importance of understanding the deadline for filing a lawsuit to seek recovery of losses.
Failure to adhere to this deadline can result in losing your right to seek compensation. The specific time limit may vary depending on the particulars of the case, and the statute of limitations may not even apply in your case. To ensure compliance and to verify your time limit, it’s best to consult with a lawyer promptly.
Contact Our Churning Attorneys in Ohio
Meyer Wilson has attorneys with years of experience handling churning claims against financial professionals. Our Ohio churning attorneys regularly go up against individuals and corporations in pursuit of damages.
We realize these situations can be awkward, but don’t let an unscrupulous advisor get away with churning. We may be able to help you obtain a fair compensatory award for your economic and non-economic losses.
Find out what your case could be worth today during a free consultation. Call now or fill out the online contact form to get started.