Losing money because of an unscrupulous stockbroker who excessively traded money from your account can be financially devastating, and the broken trust is difficult (if not impossible) to overcome. If you suspect your broker of excessive trading, otherwise known as “churning,” it is in your best interest to hold them accountable for their actions. Churning costs you money but delivers no monetary benefit. In fact, most cases of churning result in losses that do not align with the prosperity of the market. When stockbrokers are reckless with the hard-earned money of their clients, they are breaking the law and can be held liable.
The excessive trading attorneys at Erez Law have years of valuable experience helping honest investors recover their losses after trusting the wrong stockbroker. We have recovered millions of dollars on behalf of our clients and continue to hold negligent financial institutions responsible for their wrongdoings. Contact our national investment fraud lawyers by calling (888) 840-1571, requesting a free consultation, or using the live chat option on our website.
Do I Need an Excessive Trading Attorney to Handle my Case?
Excessive trading for personal benefit is regulated by the Financial Industry Regulatory Authority (FINRA). In investment fraud cases, FINRA plays a neutral role and attempts to settle disputes between investors and brokers or brokerage firms. Even if you have some experience with the traditional judicial system, FINRA arbitration will be difficult, if not impossible, to handle independently. Having a seasoned investment fraud attorney on your side can mean the difference between obtaining the money you deserve and walking away empty handed. A knowledgeable broker misconduct attorney can help you with the following:
- Interpretation of evidence: Proving churning requires you to provide evidence supporting a couple of different points. First, there must be proof that the broker had control over your account and was indeed trading excessively. Second, you must show that the broker acted with the intent to defraud you. An attorney can help you collect and present the evidence against your financial adviser and work toward full financial recovery.
- Procurement of expert witnesses: One way to prove that your brokerage acted wrongfully is to invite expert witnesses to testify on your behalf. An attorney with FINRA arbitration experience will be able to support your claim with testimonials from people who understand investment fraud and can corroborate your claim.
- Maximizing your compensation: After going through investment fraud, you deserve fair compensation. Unfortunately, brokerage firms and individual brokers will try to deny their level of fault and will seek to minimize the amount of money they owe you. A qualified churning attorney will fight to maximize your compensation and negotiate the amount you are owed.
If your broker made a FINRA violation and harmed you financially, it is important that you speak with a lawyer from Erez Law to explore your legal options.
Why Should I Choose Erez Law?
Choosing the investment fraud attorney who will best represent your interests is one of the most important decisions you will make in your case. With some high-quality investment fraud firms representing wronged investors across the country, you want to focus on who has a record of results. At Erez Law, we pride ourselves on providing effective and compassionate legal services. Here are a few of the reasons we feel you should trust us with your case:
- Multi-million dollar verdicts: Our attorneys have recovered over $175 Million for our clients. Also, our lead attorney, Jeffrey Erez, belongs to the Million Dollar Advocates Forum. The organization recognizes lawyers who secure high-dollar decisions.
- “Over the top preparedness”: Past clients consistently report that we have gone above and beyond when representing them. We strive for the highest level of understanding and readiness with every case we take. Knowledge of how best to build your case is our top priority.
- Trial ready: Time and time again, attorneys are unable to defend their clients before a judge or jury. Because so many cases are settled without a trial, many lawyers do not even consider the possibility of honing trial readiness. Our lawyers start building your case for trial from day one. Doing so helps us uncover relevant evidence and maintain the maximum understanding of your situation.
- No victory, no fees: Results are rightfully your most important concern when choosing an attorney. At Erez Law, we understand that you have already suffered financially. That is why we do not charge our clients a penny unless we obtain results for them.
Get in touch with an investment fraud lawyer as soon as you can if you suspect your broker of churning. Excessive trading can lead to unnecessary fees and a drastic loss of income if it is not addressed. Call us today at (888) 840-1571 to arrange a free initial consultation and discuss your case today.
Signs of Churning
There are warning signs that point to churning. Always speak with an attorney before assuming your broker is engaging in excessive trading. As a responsive firm with experience representing clients throughout the U.S. and Puerto Rico as well as Latin American countries like Argentina, Colombia, Venezuela and Mexico, Erez Law can investigate your claim and give you our professional opinion – we specialize in this kind of law. However, knowing what to look out for can help you seek an attorney’s help before you lose any more money.
Even if you are knowledgeable about your finances and carefully follow your investments, the signs of churning can be difficult to catch. Most investors assume their financial adviser will act in their best interest, so looking for signs of churning does not even cross their minds. However, familiarizing yourself with actions that could indicate excessive trading is a useful exercise for any investor. Some of the red flags to look for include:
- A high volume of transactions: Your brokerage firm must send you a confirmation notice whenever a trade occurs in your account. In general, the number of confirmation notices you receive will not be very high. If you notice a sudden change in the number of transactions on your account, it is possible your broker is trading for an increase in personal commission.
- Declining account value: If the value of your account begins to decrease relative to the market, you may be experiencing investment fraud. Especially if the market is experiencing an upward trend, it is suspicious for your account to decrease in value. The uptick in commission fees from an excessively trading broker could be to blame for your loss.
- Trades that don’t match your needs: You should know what your financial needs are. If you are looking for long-term stability, chances are good that you do not want your broker engaging in excessively risky behavior. A large number of transactions, especially on high-risk investments, should be a red flag that something is wrong with your account.
Of course, noticing a change in your account should not be immediate cause for alarm. There are alternate explanations for unusual transactions in your account, but they are always worth looking into. An investment fraud attorney can take an objective look at the facts of your case to determine whether your financial advisor is engaging in fraudulent behaviors.
How to Recover Your Churning Losses
To recover damages as a victim of churning, the law requires customers to arbitrate their disputes by filing a Financial Industry Regulatory Authority (FINRA) arbitration claim against the brokerage firm or individual adviser. Give yourself your best chance during this process by hiring an attorney who specializes in broker misconduct. An attorney may be able to help you prove the three elements necessary to bring a successful claim:
- Control: The broker had express or implied control over trading on your account. If you signed a trading agreement with a broker, this is evidence of control. You can also establish control by demonstrating that you always followed the broker’s recommendations (“de facto” control).
- Excessive trading: A churning case depends on evidence of excessive trading on your account. What qualifies as “excessive” depends on your type of account and investment objectives. Proof of churning may be that the trading activity on your account was inconsistent with your financial goals and risk tolerance.
- Scienter: “Scienter” refers to the broker’s intent to defraud you. You must prove that your financial adviser churned your account with the specific intent to defraud you or with a disregard of your best interests.
If a broker looking to maximize his or her compensation costs you money, you have options. Defend your rights with an experienced attorney. To have a chance against the securities defense firms your brokerage company will likely hire, you need an experienced law firm.
Frequently Asked Questions
Churning typically has a negative impact on your account for a couple of reasons. First, most brokerage firms require you to pay a commission fee based on the number of transactions a broker makes in your account. When unnecessary trades occur, you will be paying an unnecessary fee each time. Second, a broker who is excessively trading is not acting in your best interest. In fact, their actions are most likely intended to enhance their personal profit and will do little to benefit you, the investor. The broker can cash in on their commission and do nothing for you in the process. Not only are you not increasing your financial stability and receiving the service you paid for, but you are also worse off for your choice.
Many people who experience investment fraud assume their case will not be worth pursuing or that they will not be able to win against large financial institutions. This assumption could not be further from the truth. The attorneys at Erez Law can help you recover the money you lost, as well as any court and legal fees you may now owe. These damages could mean the difference between financial ruin and stability depending on the severity of your situation.
Penalties Surrounding Excessive Trading
Excessive trading is a criminal act, which is why we highly recommend you go after your broker with the full force of the law. After you begin arbitration proceedings, the FINRA reserves the right to punish brokerage firms and individual investors who engage in securities fraud, including churning. Sanctions concerning excessive trading may not have much personal benefit to you, but they might prevent your brokerage firm from acting irresponsibly in the future. If convicted, the broker or firm engaged in excessive trading could face the following:
- Fines that range from $5,000 to $110,000 per instance of churning
- Suspension that ranges from 10 business days to one year
- Indefinite suspension from trading
When a broker intentionally betrays a client, they deserve to be prosecuted to the fullest extent of the law. Call an experienced investment fraud attorney for more information about churning and how to hold your financial advisor accountable.
Contact an Attorney
A negligent financial advisor should not have the power to damage your fiscal stability. Most investors have worked years for their money and deserve security when they invest their money. Contact the investment fraud attorneys at Erez Law for a free initial consultation by calling (888) 840-1571, completing a contact form, or live-chatting with a professional on our website today.