Excessive trading, also known as churning, is an illegal and frowned-upon practice used by some stockbrokers to increase their commissions. Many times, brokers can engage in churning for a significant period of time without their excessive trades being noticed—until the investor suffers a substantial loss.
Below, we explain why excessive trading is a violation of the U.S. Securities and Exchange Commission (SEC) laws and how you may be able to recover your investment loss.
Why Excessive Trading Is a Problem
The practice of excessive trading occurs when a stockbroker makes trades for their own financial benefit, as trading in their clients’ accounts generates a commission. Now you might be thinking that this is a harmless way for stockbrokers to make money, and in some cases, there may not have been a detectable loss.
However, if excessive trades are generating significant returns, the investor will also be stuck with a substantial tax liability. Other times, the trades will result in a loss to the investor directly, which is when you’ll have the right to seek compensation for your investment losses.
Ways to Secure Repayment of Your Stock Loss
You can regain control of your investment portfolio and your life after your loss by seeking compensation from the stockbroker who wronged you. The most common way to do so is to report your loss to the Financial Industry Regulatory Authority (FINRA) and initiate FINRA arbitration.
Arbitration is typically a better option than filing a civil claim, as you’ll usually save money and, if successful, obtain your award sooner than if you chose to bring your reckless stockbroker to court.
Schedule Your Consultation with an Excessive Trading Attorney
If you have been a victim of churning and you are interested in being repaid by the broker who scammed you and/or their brokerage firm, you can consult with an experienced excessive trading lawyer at Meissner Associates.
To schedule your no-obligation claim review, call us by phone at 212-764-3100 or provide us with your contact information through the secure form at the bottom of this page.