Churning an Account in California
What Is Account Churning?
“Account churning” occurs when a stockbroker, brokerage firm,
or investment advisor conducts excessive trading with one account. By
doing so, the broker tries to illegitimately receive commissions from
the client by selling any investments that are gaining revenue to demonstrate
a sign of profit and then holding onto accounts that may not be generating
revenue. All of this excessive trading or account activity can result
in a client believing that he or she owes the broker commissions or money,
although that may not be the case.
If your stock broker is charging you excessive commissions, and you have
reason to suspect that your account has been churned, our California
investment fraud attorneys at Baldwin Mader Law Group are dedicated to helping you pursue
the compensation and justice you deserve. With more than 60 years of combined
experience, we have a thorough understanding of state and federal fraud
laws in order to determine all of your available legal options to get
the most favorable results possible.
Establish Excessive Activity & Proof of Control
According to the rules of the Financial Industry Regulatory Authority (FINRA),
churning violates the principle of “quantitative suitability,”
which requires a member or associated individual who has actual or de
facto “control over a customer account” to have a reasonable
basis for believing that a series of recommended transactions are not
excessive and unsuitable for the customer when taken together in light
of the customer’s investment profile. It is mandatory to establish
excessive activity and proof of control.
For liability to exist, even if it can be established that an account has
been churned, it needs to be proven that the broker had effective control
of your account through a written document granting the broker control
of your account, or by demonstrating that you completely relied on the
advice and recommendations of your broker that he or she was responsible
for the number of transactions in your account and their frequency.
Our California investment fraud lawyer can evaluate the following when
proving account churning:
- Cost-equity ratio
- Turnover rate
- Use of in-and-out trading in a customer’s account
Call (310) 220-0988 to Get Your Case Started Today
Brokers have an obligation to place their clients’ interests ahead
of their own, so when they engage in excessive trading, they violate that
duty. Our California investment fraud attorneys can investigate your case,
collect evidence, and develop an effective case strategy to get your entitled
compensation for funds lost by your broker.
Contact us
and request a consultation today.