Excessive trading, also known as overtrading or churning, is when a financial advisor or broker with control over your account executes trades simply to increase their commissions. Typically, these transactions don’t meet your investment objectives or risk tolerance.
Churning can be found by looking at the turnover ratio (the percentage of investments that have been sold or replaced annually) of an investment account or the number of times the investment capital has been re-invested during a certain period. In general, a turnover rate of over six times annually is excessive. However, most standard turnover rates are below once a year, so excessive activity can occur at almost any rate above that.
If you suspect that your broker has been excessively trading in your investment account to generate commissions, speak with a trusted investment fraud attorney as soon as possible who can review your case. You may be able to recover the paid commissions and any losses associated with the broker’s investment recommendations.
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