Churning and Excessive Trading

As we continue to explore the many faces of securities fraud, we turn our attention to an age old practice called churning. According to the Securities and Exchange Commission, churning is defined as excessive buying and selling of securities by your broker, to generate commissions without regard for your investment objectives.[1] You may have also heard the term excessive trading. Excessive trading is closely related to churning, but doesn’t include the intent to drive up commissions.

Both churning and excessive trading can occur when authorization of a discretionary account is granted to the broker. Once a broker has been given the “green light” to make trades without your consent, you are at risk.

Recently, a Louisiana investment firm was indicted on federal charges of securities fraud, investment advisor fraud, and conspiracy. Bowman Investment Group cost clients more than $8 million in losses.[2] The owner of the firm, Richard Buswell, is accused of executing excessive trades under client accounts in order to generate commissions for each transaction. He allegedly bilked clients for more than $1.7 million in commissions, in addition to the $8 million he cost clients in bad investments he traded. The case is scheduled to go to trial.

Schemes involving churning and excessive trading cost investors millions of dollars each year. If you have a managed account make sure you thoroughly vet your broker and the firm he represents. Ask questions about investments and do your own research to determine if recommended investments make sense for your portfolio. Ask about fees and frequency of trades before you agree to a managed account. If you think you have been a victim of churning by a securities broker or an investment brokerage firm, please give the Anton Legal Group a call to evaluate your case. S. David Anton is a Certified Securities Arbitrator and a seasoned Securities Litigation Attorney that will protect your rights and restore your investment funds.

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 arbitrations anywhere in the U.S.