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The major securities industry self-regulatory organizations have rules prohibiting stock churning. Were your stocks churned by your stockbroker? Contact our lawyers if your broker churned your portfolio.
Excessive stock trading or stock churning in order to reap more commissions may be grounds for legal action.
In order to determine if an account has been churned a stock churning attorney must review the trading record. The case will only have a chance if the attorney can show that the trading activity was excessive. Whether or not stock churning occurred can be determined in several ways:
- Calculating the size of the return necessary to cover the expense of all trading activities. If the size of the return does not justify the amount of trading that occurred than it is likely that the account has been churned.
- Reviewing the purchase and selling activity in the account. If stocks are sold and bought with seemingly no advantage from the investor’s perspective, the possibility of churning has occurred.
- Reviewing the frequency of which the equity in an account is turned over to buy securities. Determining whether or not stock churning has occurred in an account is not an exact science. The number of trades made is only one factor. Time is the other critical factor. In some instances two or three trades made over a very short time period may indicate that the stock broker is handling an account dishonestly.
In order to build a case against a stock broker who is engaging in stock churning two things must be established:
- Excessive trading occurred in view of the client’s wishes and investment goals.
- The stock broker willfully attempted to defraud the client by not acting in the client's best interests.
Are you the victim of stock churning? Contact our lawyers if your broker churned your stocks.
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