Churning occurs when a broker, investment advisor or other investment professional engages in excessive trading in a customer’s investment account. A broker, investment advisor or other investment professional churns an account in an attempt to generate commissions. When brokers, investment advisors or other investment professionals buy and sell securities in an account to generate commissions, they usually convince their clients that the trade was necessary, saying such things as he/she wanted to “get out” of the position to capture as a small profit in the stock. While these reasons often seem reasonable, they are simply excuses for the broker, investment advisor or other investment professional to charge excess commissions.
In situations where churning or excessive trading is suspected, the attorneys at Bernstein Liebhard LLP hire financial experts to review a customer’s account to determine: the annualized rate of return that would be necessary to cover the commissions charged in the account; the number of times the equity in the account was turned over to purchase new securities; and the purchase and sale trading activity that occurs in the account. We also seek information showing that the broker, advisor, or other investment professional exercised actual control over the decision making in the account, and that the broker acted in reckless disregard of the customer’s interests.
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, contact Stephanie M. Beige to discuss your rights.