Churning (Excessive Trading)

If a broker traded your account over and over in ways that generated commissions but did not serve your goals, you may have been the victim of churning. It is a form of misconduct where the activity benefits the broker, not you. FINRA explains how excessive trading can erode returns, and how to guard against it, in its investor guide, 3 Ways to Guard Against Excessive Trading in Your Brokerage Account.

Trading Should Serve Your Goals, Not the Broker’s Commissions

Brokers are not supposed to treat your account as a source of commissions. When trading is driven by what the broker earns rather than what you need, that may breach the duty they owe you.

What Churning Looks Like

Churning usually shows a pattern, such as:

• A high volume of buying and selling that does not match your stated goals
• Frequent in-and-out trades with no clear strategy
• Commissions and fees that eat up a large share of your account
• Trading that increases right after you add money
• The broker, not you, driving nearly all the activity

Signs Your Account May Have Been Churned

• Your statements show constant buying and selling
• Fees and commissions seem high relative to your returns
• You did not request or understand most of the trades
• Your account value dropped while trading activity stayed high
• You were a conservative investor, but your account was very active

How Churning Claims Work

Churning claims are typically pursued through FINRA arbitration rather than a court lawsuit. An attorney can analyze your trading frequency and the cost of that trading relative to your account to evaluate whether it crossed the line. ChapmanAlbin handles the entire process for you.

ChapmanAlbin works on a contingency basis. There is no cost to speak with us, and in most cases you pay nothing unless we recover money for you.

What to Do If You Suspect Churning

Act sooner rather than later, because time limits can apply. Gather your account statements showing the trades and fees, and have an attorney review the activity.