Churning/Excessive Stock Trading

Churning/Excessive Stock Trading

Churning/excessive stock trading is an illegal practice used by a financial advisor to earn commissions related to the trades. Churning occurs when a financial advisor completes a large number of trades in the client’s account for the purpose of generating commissions. Churning is prohibited by federal and state laws, and FINRA rules. To prove a claim for churning/excessive stock trading, a claimant must establish three elements. The first is that the financial advisor had control over the client’s account (either expressed control, as evidenced by a signed agreement, or implied/de facto control). The second element is the excessive trading itself. The last element is scienter, which is a legal term that means intent. The financial advisor must have either specifically intended to defraud the client or acted with a reckless disregard for the client’s interest. Contact us today!