Skip to content

Churning (Excessive Trading)

Delivering The Results You Deserve

The founding attorneys of CMF spent the majority of their careers at large New York defense firms, representing brokers and broker-dealers in securities litigation, arbitration, administrative and regulatory proceedings before FINRA and the U.S. Securities & Exchange Commission.  Having extensive experience working on both sides of the fence, we have a unique understanding of the complexities of securities arbitration, mediation, regulation and litigation.  Because CMF represents both plaintiffs and claimants in civil matters, and defendants and respondents in administrative and regulatory matters, we are familiar with all of the relevant legal arguments.

We Are Here To Help

Excessive trading, commonly referred to as “churning,” involves the broker trading securities in the account in an excessive manner. In this type of case, the broker places his own interests ahead of those of his customer for the purpose of generating additional commissions and fees. When brokers buy and sell securities in an account to generate commissions, they usually convince their clients of reasons the clients should quick profits.  While these reasons seem valid, these are often simply excuses for the broker to charge excess commissions.  Although churning often occurs by trading in and out of stocks, churning can also occur by short-term trading in mutual funds, bonds or annuities.

To establish that your broker has churned your account, we will demonstrate that the pattern of trading activity in your account was excessive. This can be done in a number of ways including calculations to determine the annualized rate of return that would be necessary to cover the commissions charged in your account; the number of times the equity in your account is turned over to purchase securities; and the purchase and sale trading activity that occurs in your account.

Churning occurs because many securities brokers play a dual role as both investment advisers and salespersons and because of the compensation system used in the securities industry.