Churning/Excessive Stock Trading

Financial advisors must keep your best interests at heart as they make strategic stock trades on your behalf. If they don’t, you could experience significant losses that seriously impact your current and future financial outlook.

Churning and excessive stock trading, for example, can leave you destitute while your financial advisor rakes in the cash. Unfortunately, unless you know what to look for, it’s often hard to tell it is happening until it’s too late.

Fortunately, you can learn about all the signs of churning and excessive stock trading — and report them to your attorney at Schwartz Law if you suspect your financial advisor is mismanaging your funds. You can then get help recouping your losses in court plus any damages caused by their fraudulent activities.

What is Churning and Excessive Stock Trading?

Churning and excessive stock trading occurs when your financial advisor makes rapid trades using your accounts in order to earn commissions for themselves. These trades occur with zero regard for how it impacts your investments, often resulting in minimal to no growth if not outright losses.

In addition to going against the spirit of the profession, churning and excessive stock trading is illegal at the state and federal levels. Beyond that, it goes against FINRA rules and guidance for how financial advisors should serve their clients.

Most Common Signs of Churning

Even when acting in your best interest, financial advisors can misread the market, resulting in slow growth and even losses from time to time. If that happens, they may need to rapidly change course to help rebuild your financial standing and move forward.

Churning and excessive stock trading go well beyond simply changing course to abusing your accounts for the financial advisor’s personal gain. Due to the nature of the industry, however, these fraudulent activities are often difficult to detect, especially in the earliest stages.

You can improve your chances of spotting churning and excessive stock trading by watching your accounts carefully for the following signs.

Unauthorized Activity

Your financial advisor should only make trades that you directly authorize. So, if you see any strange trades in your accounts, your financial advisor may be trying to pad their pockets using your money. In most cases, these trades will result in commissions for your advisor and big losses for you, but that doesn’t always happen right away.

Rapid Purchases

In some cases, advisors may try to hide their activities by making excessive trades that loosely follow your guidelines. For that reason, it’s also important to watch for rapid trading that doesn’t seem to make much sense. Reflect on your risk tolerance and overall goals for your investments to see if the trades truly match your expectations.

High Fees

Your fees should remain fairly consistent throughout your relationship with your financial advisor. If the fee totals start to creep far above the norm, then you might have a problem on your hands. Another surefire sign is high fees generated just by one segment of your portfolio, which may occur as a way to try to hide the churning activities.

If you notice any of these signs, it’s well worth investigating if your financial advisor is engaging in churning and excessive stock trading using your accounts. By acting fast, you can halt the problem in its tracks and greatly limit your losses.

How to Proceed if You Suspect Excessive Stock Trading

If you suspect that your financial advisor is mismanaging your accounts, it’s important to get help right away. You can call our attorneys at Schwartz Law for a consultation, and we’ll help you figure out if you might have a case.

If your case goes to court, we will need to prove three elements:

  • The financial advisor had complete control of your accounts
  • That churning and excessive trading occurred over a specific period of time
  • Your advisor intended to defraud you or acted recklessly for their own financial gain

Furthermore, we must clearly show your potential and actual losses plus damages, so you can recover what you lost from their churning and excessive stock trading activities.

If you notice any of these signs, it’s well worth investigating if your financial advisor is engaging in churning and excessive stock trading using your accounts. By acting fast, you can halt the problem in its tracks and greatly limit your losses.

Suspect Churning and Excessive Stock Trading? Schwartz Law Can Help

Our team at Schwartz Law is always here to help you manage your legal issues, including suspected churning and excessive stock trading. We can provide the representation you deserve and help you work on recouping your losses through the courts. Since we work on a contingency fee basis, we only collect a fee if we’re able to help you recover your losses.

If you’d like to discuss your case with our attorneys, please feel free to contact us for a free consultation. During that consultation, we can help you figure out if churning and excessive stock trading likely occurred and learn how to move forward in building a case.