Churning is when a broker excessively trades in your account. It prioritizes fees over your interests. This can happen with stocks, mutual funds, bonds, or annuities.

To win a “churning” claim, you must prove two things. The broker controlled transactions and exceeded your risk tolerance.


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Excessive Trading or Churning Attorneys at Oakes & Fosher LawOakes & Fosher, LLC helps investors nationwide recover from fraud. With 20 years of experience, we’ve aided 1,000 investors, securing $100 million.

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Signs of Excessive Trading: How to Recognize

Spotting too much trading in your investment account protects your money.

Here are key indicators to watch for:

  • High Trading Volume: An unusually large number of trades within your account over a short period should raise a red flag.
  • Mismatch with Investment Goals: Transactions that do not align with your stated investment objectives or risk tolerance.
  • Increased Commissions and Fees: A significant rise in costs associated with trades in your account, which can eat into your investment returns.
  • Short Holding Periods: Frequent buying and selling of securities that result in short holding periods for investments.
  • Unsolicited Trades: Trades made without your approval or knowledge.

Being alert to these signs can help you detect and address potential churning in your investment account.

Proving Broker Control Over Account Transactions

The first element in a churning claim is demonstrating that the broker had de facto control over the trading activities in your account. The broker may not always need formal permission to trade. They could act without your input, taking control of decisions.

Establishing Control

To establish that a broker controlled the account, evidence can include:

  • Communications between you and the broker
  • Your trading history (including patterns that suggest a lack of engagement in trading decisions)
  • Any agreements or contracts

Gather documentation and records that illustrate the broker’s made trade decisions without the necessary input or consent from you, the client.

Demonstrating Excessive Trading

The second fact to prove in a churning claim is that the level of account activity exceeded your investment objectives and risk tolerance.

“Excessive” can vary widely from one investor to another, depending on their financial goals and how much risk they want to take.

Our lawyers know how to make this subjective assessment.

What Constitutes Excessive Trading?

Excessive Trading or ChurningTo successfully argue that trading was excessive, you must provide a clear picture of your investment objectives and risk tolerance at the time the alleged churning occurred.

This often involves reviewing:

  • Your initial account setup documents
  • Your financial situation
  • Any relevant communications with your broker about your investment goals

Then, we compare this information against the trading activity in your account. This includes the turnover rate and the cost-to-equity ratio to determine if the broker took disproportionately aggressive actions compared to your stated objectives.

The Path to Success in Churning Claims

Winning a churning claim requires a well-prepared case that convincingly proves both control of the account by the broker and the excessive nature of the trading activities. Here are steps to strengthen your claim:

Gather Comprehensive Documentation

When you’re dealing with a churning claim, your mission is to collect as much evidence as possible. Our lawyers can help you collect this evidence. This evidence includes all emails, messages, agreements, and account statements that show what you and your broker talked about and the trades made in your account.

When you put these documents together, they show the big picture of how your broker managed your investments. Keep everything organized and safe so that when the time comes, you can clearly show what happened.

Quantitative Analysis

Quantitative analysis might sound complicated, but it’s basically using numbers to tell a story. In this case, the story is about whether there was too much trading in your account.

Two main numbers help do this: the turnover rate and the cost-to-equity ratio.

  • Turnover rate is like counting how many times your entire account’s worth of stocks was bought and sold in a year. If this number is high, it might mean there was too much trading.
  • Cost-to-equity ratio measures how much the trading costs are eating into your investment. It’s like checking if you’re spending too much money on fees compared to how much money you have in your account.

By looking at these numbers, you can show whether your broker was trading too much for your comfort level and goals.

Expert Testimony

Sometimes, you need a pro to help explain your side of the story. This is especially true when the story involves complex trading activities. This is where financial experts come in.

These expert witnesses look at all the evidence, including the documentation you collected and the numbers from the quantitative analysis. They explain whether the trading in your account matches what you wanted and if it is reasonable. Their job is to make sure the arbitration panel understands the technical parts of your claim in a simple way.

By following these steps, you’re building a strong foundation for your claim. Collecting the right documents shows what happened. Using numbers helps prove your point.

Getting an expert’s opinion adds credibility to your case. Together, these elements can help you present a clear and convincing argument that your broker may not have acted in your best interest.

Damages Available for Churning Claims

Compensation for Churning ClaimsIn churning claims, damages often aim to compensate for the financial losses experienced due to excessive trading by a broker.

These damages may include:

  • The recovery of lost funds from unauthorized or unsuitable trades
  • Reimbursement of excessive commissions and fees paid
  • Sometimes, interest on lost investments

In certain cases, claimants may also seek punitive damages. These are intended to punish egregious conduct and deter future misconduct. The exact nature and amount of damages available can vary based on the specifics of each case and the applicable legal standards.

Contact a Securities Arbitration Attorney at Oakes & Fosher Today

Bruce Oakes, Lawyer for Excessive Trading Churning

Bruce Oakes, Excessive Trading Churning Attorney

Securities arbitration attorneys at Oakes & Fosher, LLC can explain turnover ratios and break-even percentages. Contact us online or call (314) 428-7600 to discuss your situation in a free evaluation.


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