Churning / Excessive Trading

Churning refers to the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives. For churning to occur, your broker must exercise control over the investment decisions in your account, either through a formal written discretionary agreement or otherwise.

For example, if you relied on your broker’s advice because you were unable to evaluate the broker’s recommendations and exercise your own judgment, your broker may have exercised control over your account. Churning can be a violation of SEC Rule 15c1-7 and other securities laws.

The major securities industry self-regulatory organizations have rules prohibiting churning and excessive trading. Excessive trading is the same as churning, but without the requirement that the person engaging in the trading does so for the purpose of generating commissions. Churning and excessive trading can violate FINRA Rule 2310, FINRA Rule 2310-2(b)(2), NYSE Rule 408(c), and NYSE Rule 476(a)(6).

If you suspect that your financial adviser has churned or excessively traded your account or engaged in another sales practice abuse, please contact Wittenberg Law to discuss your legal rights and options.