Broker Fraud: Churning

Stockbrokers are financial professionals who manage investment portfolios for those who lack the time, knowledge, or desire to do it themselves. Brokers can help you to steer clear of overly risky or unproductive investments while pinpointing ones that best fit your unique interests. They can help you find stocks that generate the best balance of security and profit according to your risk tolerance.

Sometimes brokers take advantage of the power that they hold over their clients’ portfolios and begin committing fraud to skim off the top of a client’s account. One such method is called churning, which can lead to hundreds or even thousands of dollars worth of unnecessary fees that go straight to your broker’s pocket.

What is Churning?

Churning is the colloquial term for a specific type of broker fraud that is also known as excessive activity. Typically, a broker receives a commission for the number of stock purchases and sales that he or she conducts. The more transactions, the more money the broker receives. A broker may try to play the system by encouraging an investor to buy or sell more frequently than he or she should just to make extra commission from the account.

Losing Money through Churning

Over time, the commission costs of churning can become rather significant and might unfairly deplete your investment account. If you have noticed an increasing frequency of transactions that your broker is completing each month without an adequate reason or results to validate the change, your broker may be committing broker fraud through churning.

Contact Us

In many cases, brokers who commit churning try to defraud several investors using the same method. You may be eligible to join a class action lawsuit against your broker if others have suspected the same individual or business of fraud. To learn how we can help you join a suit and pursue compensation from your broker, contact the broker fraud class action lawyers of Feazell & Tighe, LLP, at 877-508-0588.