Excessive trading, or churning, occurs when a financial advisor or broker excessively buys and sells securities in a client’s account with the primary purpose of generating commissions for themselves instead of benefiting their client. This unethical practice can result in significant financial losses for the investor.
If you notice signs of unauthorized trading on your account, you could be a victim of churning. Consult with one of our Pennsylvania investment fraud lawyers to discuss pursuing compensation. If you decide to move forward with us, our team will investigate your advisor and seek financial damages on your behalf.
Contact Meyer Wilson for a free consultation with an excessive trading/churning lawyer serving Pennsylvania.
What Makes Our Law Firm Unique?
When confronted with financial losses resulting from stock churning or other investment churning, selecting the appropriate law firm becomes essential. Our lawyers are nationwide leaders in investment fraud cases.
Here are some of the ways we stand out from our competitors:
- Our legal team has more than 75 years of combined experience.
- We have achieved outstanding results for clients—over $350 million.
- We received the honor of being named the 2024 Best Lawyers in America.
- Powerful defendants or aggressive legal teams do not intimidate us.
- We only earn attorney’s fees if we recover money at the end of your case.
When seeking legal representation for your financial misconduct case, rely on our firm’s extensive experience, unwavering dedication, and track record of successful case results. We prioritize championing your rights, guiding you through intricate legal proceedings, and securing what is rightfully yours.
How Our Financial Misconduct Attorneys Fight Back Against Churning
Investment churning can be difficult to deal with alone. You may have lost thousands of dollars but have no concrete proof of churning. Even if you merely suspect churning, an attorney from Meyer Wilson can investigate your case and let you know if they believe you are a victim.
When you retain an attorney from our law firm, you immediately gain access to an invaluable wealth of resources. Our lawyers and support staff can walk you through the legal process while educating you on your rights and keeping you updated about your churning claim. Pennsylvania has a statute of limitations that may apply to your case, so don’t wait too long to take action.
Is Churning a Form of Investment Fraud?
If a financial professional is churning your account, this is a type of investment fraud. Churning is the excessive buying and selling of securities to create a profit for the financial professional. Many stockbrokers and other financial professionals receive commissions and often additional fees every time they buy and sell securities on behalf of an investor.
As we mentioned previously, unscrupulous advisors and brokers may excessively trade for commissions without regard for the investor’s best interests. Churning could lead to the loss of significant funds while a criminal advisor profits on the trades.
If you suspect your financial professional of committing investment fraud in the form of churning, contact an attorney right away. The sooner you involve a lawyer, the sooner you will have a professional safeguarding your rights. If you are unsure whether you are a victim of churning, discuss your situation with a lawyer who can help you recognize the common signs.
How Unscrupulous Advisors Churn Investments
Financial professionals engaging in investment churning (also referred to as excessive trading) exploit clients with unethical behavior. This betrayal of trust often results in significant financial losses for investors.
Churning is not only unethical but also illegal and subject to civil penalties, according to the U.S. Securities and Exchange Commission (SEC). The SEC defines churning as the excessive buying or selling of securities by financial professionals, constituting fraud when not aligned with the client’s best interests.
While advisors may trade securities for clients’ benefit, solely trading for commissions constitutes misconduct. Churning occurs when individuals in control of investment decisions within a client’s account excessively trade, disregarding the client’s financial well-being.
Uncovering Concealed Churning Practices
To mask churning, investment advisors often designate brokerage account strategies as “speculative,” tailored to a “high” or “aggressive” risk appetite. By framing trades in this light, firms aim to justify their actions, citing client consent to high-risk maneuvers.
Yet, advisors must uphold their duty to ensure their strategies serve clients’ interests and comply with industry standards. Even if clients opt for aggressive tactics, scrutiny may uncover activities that are sabotaging their financial goals.
Investors never want their accounts manipulated for advisor gain, regardless of how aggressive their investment style is. Investors who suspect churning can pursue compensation through various legal channels. Our nationwide team focuses on investment fraud cases and knows how to secure justice for financial fraud victims.
How to Detect Churning
As a savvy investor, you may already know that financial professionals don’t always have your best interests in mind. If you are new to investing, however, you may fall prey to financial professionals who target green investors for churning. The best way to protect your assets is to learn the signs of churning.
Here are some red flags to watch out for:
- Too many notifications confirming trades
- An unusually high turnover rate (four to six or more)
- A pushy or negligent advisor
- Returns that don’t match the market
- Unsuitable investments
- Unexpected fees and commissions
- Lack of communication
- Lack of diversification
- Overall poor performance
As soon as you notice something amiss in your account or in the way your financial professional manages it, contact a lawyer from our team for a free legal consultation. If churning has already led to a loss of funds, you could be eligible for reimbursement from the at-fault financial professional or brokerage firm.
We can help you navigate arbitration or bring a civil lawsuit or class action in Pennsylvania.
Proving Churning: Key Elements
In a legal battle against an advisor accused of churning, the burden of proof lies with the plaintiff. Partnering with an attorney can alleviate this burden by leveraging our experience in evidence collection, expert witness hiring, and other essential steps for a successful claim.
- Control of the account: The advisor must have exercised control over your investment account during the period of excessive trading. This entails sole responsibility for trading decisions, distinguishing between express and implied control.
- Excessive or unreasonable trading: The investor or their attorney must demonstrate that the trading activity was disproportionate or unsuitable for their account. If a reasonable and prudent financial professional would have avoided such trades, churning may be evident.
- Intent to churn: You or your legal counsel must establish the broker’s intent to churn the account. Evidence must illustrate intentional deception or reckless disregard for the investor’s best interests.
Our attorneys excel at analyzing the turnover ratio to support your case. This ratio, calculated by dividing the total purchases by the account’s average monthly equity, provides important insight into trading volumes. Significantly exceeding the typical ratio may indicate churning.
How Is a Churning Claim Brought to Arbitration?
We primarily resolve these cases via FINRA arbitration, where a neutral panel of arbitrators evaluates evidence, hears arguments, and issues binding decisions.
FINRA arbitration is the preferred resolution method in most cases due to its efficiency and financial focus. In short, arbitration is a quicker and more cost-effective alternative to traditional court proceedings.
Factors the arbitration panel considers include the following:
- Turnover: Evaluating the dollar value of buy transactions compared to the portfolio’s average net worth or equity can reveal churning. A turnover ratio exceeding 400% is a strong indicator of excessive trading.
- Control: Evidence showing your advisor had control over your account strengthens your claim.
- Commissions and fees: Assessing whether transaction costs were disproportionately high relative to any potential benefits can help your case.
- Documentation: Verifying the availability and accuracy of records such as account statements and communication logs is vital when preparing for the arbitration.
- Breach of fiduciary duty: Examining if the advisor violated their fiduciary duty may apply in some cases.
If you’ve experienced stock churning or excessive trading, our team is ready to assist. Don’t tolerate financial fraud. One of our Pennsylvania excessive trading/churning lawyers is here to help you seek damages for your losses resulting from financial advisor misconduct.
Choosing the Right Pennsylvania Excessive Trading/ Churning Lawyer
When seeking legal representation for an investment fraud case in Pennsylvania, you should consider several key factors:
Experience
First, assessing the lawyer’s experience and proficiency in handling investment fraud cases is vital. A successful track record in this specific field of law, coupled with a deep understanding of the relevant regulations, is the key to competent representation.
Reputation
Equally important are the lawyer’s reputation and credibility, which can be ascertained through researching their education, previous cases, and client feedback. A lawyer who enjoys respect in the legal community and has received positive reviews is more likely to provide robust representation.
Communication
The lawyer’s communication style and accessibility are also important considerations. Effective communication and responsiveness to client needs foster transparency and trust, which are vital components of a fruitful attorney-client relationship.
Fee Structure
Lastly, it’s important to understand your lawyer’s fee structure. While cost should not be the sole consideration when choosing an attorney, you’ll want to balance affordability with your legal representation needs. Our law firm accepts cases on a contingency fee basis, which means we only get paid when we win. We will discuss our percentage during your risk-free consultation.
Request a Free Consultation About Churning Today From Our Lawyers
Secure your financial future by seeking guidance from our dedicated team at Meyer Wilson. We are committed to protecting investors from harmful financial practices like churning. Our excessive Pennsylvania trading/churning attorneys know how to uncover fraudulent trades and maximize compensation for those affected.
Excessive trading, a form of investment fraud, can wreak havoc on your portfolio and threaten your future goals. When a financial professional engages in churning, they should be held liable for the resulting damages. Our team has the experience and resources to help you achieve the financial recovery you deserve for your investment losses.
Contact us today for a free consultation.