Churning

Alabama, Georgia, Florida

Excessive Trading
Churning, or excessive trading, is just as it sounds: frequent buying and selling in an investor's account. But to qualify as churning, your stockbroker or financial advisor must control your account or have discretion over your trades.

Brokers earn a living by generating commissions for each of your trades, whether you gain or lose money. This is one reason why churning has become such a popular form of securities fraud.

No Need to Switch Companies
You broker may tell you that because the market conditions have changed, the original mutual fund you purchased is no longer appropriate, so you should choose a different one. If you change funds within the same company, your broker won't generate additional commissions. But if he or she is pressuring you to switch mutual fund companies, this should raise a red flag.

Your original company probably offers a variety of different mutual funds to meet specific investor needs. You should therefore be able to find an appropriate mutual fund without changing companies. If you do switch companies, you'll end up paying a new commission or other fees. This happens every time you change companies, so be wary.

The "Quick Profit" Fib
If you notice your broker has bought and sold the same stock two or more times in a month, you may be the victim of excessive trading or churning. Your broker might try to convince you that this practice will result in "quick profits." This may sound legitimate, but they are actually just excuses for the broker to charge excessive commissions.

Churning is often harder to prove than other incidents of securities fraud. To win a churning suit, you need proof that the broker actually conducted the trades, and that those trades exceeded the normal amount of transactions recommended for your account. You also need to show that those trades were executed without regard your personal interest and profitability.

The securities fraud attorneys at Burke, Harvey & Frankowski, can analyze your stockbroker's records to determine if churning has occurred. This can be done by:

• Calculating how much trading it would take to cover the amount of commission made on your account.
• Evaluating the amount of trading activity in your account.
• Totaling the number of times the equity in your account turned over. Time is a factor and a turnover of two or three can under some circumstances mean churning.

If you or a loved one has been victimized by churning, please contact our law firm today. Our stockbroker malpractice attorneys serving Florida, Georgia and Atlanta can answer your questions and help you recover your losses. Call or e-mail us today for a free consultation.

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