Representation For Investors Who Are Victims Of Churning
Brokers and security firms are required to adhere to certain ethical standards of conduct as set forth by the Financial Industry Regulatory Authority (FINRA) — formerly “NASD,” the National Association of Security Dealers. When brokers engage in the excessive buying and selling of stock, they increase the amount of commission earned on an account. A large number of stock sales and purchases is rarely justified, and under certain circumstances it is considered “churning.” Churning results when brokers intentionally increase stock sales and purchases in order to increase their commission. Not only does churning lead to financial loss through increased commission payments, it can also result in unwise, costly stock trading. The law office of Jeffrey A. Feldman investigates broker misconduct when churning is involved or suspected, working closely with forensic accountants and investigators in reviewing a stock broker’s actions over time.
If an unexplained pattern of increased stock trading has resulted in financial loss, complete an online contact form and schedule a free consultation to discuss your case.
Investigating The Activities Of Your Broker — Uncovering Churning
While each case is different, the following steps can be taken to determine if your broker has engaged in churning:
- Calculate the annualized rate of return needed to pay for commissions charged to an account (You must earn more than this to have a positive return)
- Evaluate the pattern of sales and purchases of an account.
- Determine portfolio turnover. If your portfolio turns over more than five times in a year, it is probably being churned.
- Determine how often equity in an account was used to purchase stock.
Tracking And Analyzing Patterns — The Devil In The Details
Churning is usually obvious when reviewing an account’s history. Significant trading in an account doesn’t help anyone but the broker and his firm. Since most brokers who engage in churning will try and rationalize their actions as reasonable, legitimate responses to opportunities and fluctuations in the marketplace, evaluating whether a history of trades was advantageous to a client is essential.
As your attorney, Jeffrey A. Feldman works with experienced accountants and financial experts in analyzing and evaluating the history of your account. Mr. Feldman reviews the trading history of a broker, consulting investment specialists to evaluate and determine whether or not certain trades were necessary or beneficial to his client. When unnecessary or harmful trades are found, Mr. Feldman confronts the broker or investment firm involved, demanding financial accountability.
Recovering Financial Loss
While most cases involving churning can be settled without going to trial, Mr. Feldman prepares each case for arbitration or litigation. During negotiations with lawyers from the other side, Mr. Feldman consults with his client in order to keep them informed and ensure they have the information they need to make the best decision for them.
Contact An Experienced Attorney
If you suspect you may have been the victim of churning, complete an online contact form. Consultations are free and confidential, and do not involve any legal or financial obligation on your part.
Handling Securities-Related Disputes, Arbitration, and Litigation
in California and Nationwide-Call (415) 391-5555
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The Law Offices of Jeffrey A. Feldman