What is Churning and how can it affect me?

Churning is a term used to describe the practice of “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.” [1] Since stock brokers earn commissions based on how many trades they make, this Tampa lawyer can tell you it is very easy and very tempting to cross the line, make a few extra trades and bring a nice paycheck home to the misses. Unfortunately, it can be very hard to detect and prove until the abuse becomes flagrant. This stock broker ripoff can also be very damaging, in some cases sucking hundreds of thousands of dollars from your portfolio before the indiscretion is discovered!

So, how do you discover if this has happened to your accounts? As a certified FINRA (formerly known as the NASD) arbitration panel member since 2001, S. David Anton of Anton Legal Group is uniquely qualified to help! The first thing to remember is discovery can be difficult. Is your stock broker really trying to rip you off, or is he just ignorant of best practices? Obviously, there is a point at which a stockbroker is making justifiable trades and is genuinely attempting to maximise performance. No one can give you a definitive number between appropriate trading and churning. Each case is completely individual.

What would a Tampa lawyer say is the best way to stop it? You can protect yourself from “churning” by limiting the stock broker’s authority to engage in discretionary trading. Obviously, limiting your brokers ability to trade without your permission is your best option. If they don’t have the power to make a trade without approval, they can’t abuse the privilege of trading for you. Of course, this may not make sense for some individuals depending on the portfolio, target objectives, and availability of communication in your particular situation. In my post “11 Ways to Protect Yourself Against Stock Broker Fraud” [2], I’ve outlined some excellent tips to keep in mind whenever you chose to invest in the stock market.

If you feel you have been the victim of a stockbroker ripoff or need legal market advice, call the best Tampa lawyer with the experience necessary to give you the help you need. Call S. David Anton of Anton Legal Group!

S. David Anton is a member of Public Investors Arbitration Bar Association (PIABA) the preeminent national wide organization of attorneys who represent brokerage firm customers in disputes with the industry.  He is also a Certified Securities Arbitrator with the Financial Industry Regulatory Authority (FINRA), formerly NASD and resolves disputes between investors and stockbrokers, investment advisors and their firms. He has been practicing law since 1985 and representing brokerage firm customers since 1999.  He is a Tampa, Florida based attorney who can handle securities arbitration anywhere in the U.S.


[1] http://www.sec.gov/answers/churning.htm