Churning and/or excessive trading occurs when a broker or adviser effects transactions in the account for the purpose of generating a commission. Churning is determined in light of the customer's investment objectives and suitability. Simply because the customer consented to the transactions does not permit a broker to churn or excessively trade an account. Churning and excessive trading may be indicated by a high volume of transactions (also known as excessive activity), but not necessarily. An account may be churned without having excessive activity. Additionally, if a broker is constantly recommending the purchase or sale of securities or mutual funds when there is very little profit or loss, it may be indicative of churning.
Churning and engaging in excessive activity are each forms of broker misconduct equivalent to fraud. If you believe there has been excessive activity or trade volume in your account, or if you believe your broker may be recommending transactions more for the purpose of generating commissions than pursuing your investment strategy, you should consult a securities fraud attorney to investigate this activity.
To learn more about churning, call us at 903-597-2221 or contact us online.