Miami Churning Attorney

Churning occurs when a financial advisor or broker recommends and engages in excessive buying and selling of any investment for the purpose of generating commissions. The expression “Churning” comes from the method since the Middle Ages of making butter from cream by agitating the cream. It can involve stocks, options, bonds, commodities, or any investment product. Often times this trading has no logical connection to an overall investment strategy. It is usually short term in nature where profits are cut short so that a position can be sold for a small profit and the funds promptly reinvested. Churning is also marked by a high amount of commissions relative to the value of the account.

For example, accounts that are managed by a portfolio manager are often charged an all-inclusive fee of 1.0% to 1.5% of the value of an account and that fee will include commissions. In contrast, accounts that are managed by a broker on a commission basis will be charged a separate commission for each trade. Anytime commissions and margin interest exceed 1.5% to 2% of the value of the account, there should be concern about whether the financial advisor is acting in the best interests of the customer or whether the advisor is churning the account to generate commissions.

Churning does nothing more than take money from the customer and transfer it to the financial advisor. It is highly unethical and can destroy the performance of a portfolio. Churning is a violation of SEC and FINRA rules. Contact our Miami churning attorneys for more information.

Carlson & Associates, P.A. has experience in handling investment fraud cases involving churning.

Contact our Miami Investment Fraud Attorneys

Carlson & Associates, P.A. has years of experience helping Miami clients with investment fraud, corporate & partnership disputes, officer liability and coverage & legal and accounting malpractice. Contact us online or call 305-372-9700 for more information or assistance.