Securities Arbitration

Customers may grant their brokers discretionary authority to place trades in customers’ accounts, which increases risks and opportunities for abuse such as excessive trading.  Due to these risks, securities regulators expressly prohibit firms and their brokers from conducting excessive trading in accounts in which they have discretionary authority.  Trading is excessive when it exceeds what is suitable for customers’ investment profiles and objectives, and trades may be excessive in both size and frequency.  Additionally, firms are required to monitor for and detect trading that is excessive considering the financial resources and character of customers’ accounts. 

Churning is a malicious form of excessive trading that occurs when brokers intentionally maximize their commissions at the expense of their customers.  Often, broker compensation includes commissions on each trade performed on behalf of their clients.  This compensation creates an opportunity for brokers to churn their customers’ accounts by executing unnecessary trading that only benefits the broker through the commissions that they have earned.  Churning is a serious fraud that can cost investors significant losses.

When brokers engage in excessive trading or churning, customers have a right to pursue legal action seeking a recovery of their losses.  Determining whether you have been victimized by your broker through excessive trading or churning is complicated and requires significant legal analysis.  Call Marquardt Law Office LLC for a free evaluation of your potential excessive trading or churning claim.