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.
Oakes & Fosher, LLC helps investors nationwide recover from fraud. With 20 years of experience, we’ve aided 1,000 investors, securing $100 million.
Since 2007, Oakes and Fosher has won more cases on behalf of individual investors tried before full FINRA panels than any other attorney in the country.
Known for our success in FINRA cases, we prioritize our clients. We provide free, private consultations and work on contingency fees.
Spotting too much trading in your investment account protects your money.
Here are key indicators to watch for:
Being alert to these signs can help you detect and address potential churning in your investment account.
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.
To establish that a broker controlled the account, evidence can include:
Gather documentation and records that illustrate the broker’s made trade decisions without the necessary input or consent from you, the client.
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.
To 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:
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.
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:
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 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.
By looking at these numbers, you can show whether your broker was trading too much for your comfort level and goals.
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.
In churning claims, damages often aim to compensate for the financial losses experienced due to excessive trading by a broker.
These damages may include:
In certain cases, claimants may also seek punitive damages. These are intended to punish egregious conduct and deter future stockbroker fraud. The exact nature and amount of damages available can vary based on the specifics of each case and the applicable legal standards.
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.
