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Churning happens when an investment advisor makes unnecessary trades mainly to earn commissions, not to grow your money. Authorities like the SEC and FINRA warn that churning is illegal, unethical, and one of the most common types of investment fraud. If your investment advisor traded your account too often or without your permission, you may have a claim for recovery.
The Securities and Investment Fraud lawyers at Levin Papantonio in Pensacola, Florida, are helping victims recover financial losses from churning and excessive trading.
If your advisor made excessive trades that drained your account, you may be entitled to recovery. Contact Levin Papantonio for a free, confidential case review and learn how to protect your financial future.
Churning is a form of securities fraud where an investment advisor makes trades that are far more frequent than your investment goals require. The focus is on generating commissions, not improving your financial future. According to investor education sources, churning often involves repeated buying and selling of the same stocks or funds, high turnover rates, and activity that doesn’t match the client’s risk tolerance or age.
This type of excessive trading often happens when an investor gives an investment advisor control over the account or trusts the advisor to “handle everything.” If the advisor uses that trust to make trades that benefit them instead of the client, the investor may suffer significant financial harm—even if some trades appear profitable on the surface.
Excessive trading is when the overall level of trading in an account is so high that it does not make sense for the investor’s needs. Under FINRA Rule 2111, investment advisors must recommend trades and strategies that are suitable for the client’s goals, financial situation, and risk tolerance. When the volume of trading is unreasonable, it violates what FINRA calls “quantitative suitability.”
Excessive trading may not always involve intent to defraud, but it still harms investors. When excessive trading is done to generate more commissions or fees, it often crosses the line into churning and becomes a serious violation of federal and industry rules.
Every trade has a cost. Commissions, markups, margin interest, and hidden fees can drain your account faster than you realize. Excessive trading increases these costs dramatically. Even if your account balance doesn’t collapse right away, your long-term gains can be wiped out by fees and short-term decisions that interrupt steady growth.
Churning also exposes investors to unnecessary market risk. Instead of maintaining a long-term strategy, your advisor may jump in and out of positions, causing you to miss gains, trigger losses, or face sudden downturns. This is especially harmful for retirees and conservative investors who cannot afford unpredictable swings in their portfolios.
If you see frequent trades and rising fees without clear explanations, contact Levin Papantonio for a review of your trading history.
Investors should look for red flags that regulators link to churning and excessive trading. These include:
Some investors also receive “activity letters” from their brokerage firm asking them to confirm the level of trading. This is often a sign that the firm’s monitoring system has flagged the account. If you notice any of these warning signs, you may be experiencing investment fraud.
Unnecessary trading and inflated commissions are signs of broker misconduct. Schedule your free consultation with Levin Papantonio today and let our investment fraud attorneys help you pursue the compensation you deserve.
Financial advisors must follow strict rules built to protect investors. These include:
When advisors violate these duties, and the violation causes losses, investors may be entitled to compensation through FINRA arbitration or litigation.
If you suspect excessive trading, start by reviewing your account statements, trade confirmations, and monthly summaries. Ask your financial advisor for clear explanations about trades you don’t understand. Regulators recommend filing written complaints with the brokerage firm and keeping records of all communications.
A securities fraud lawyer can analyze your account using industry-recognized measures such as:
Once damages are calculated, your attorney may file a claim in FINRA arbitration or court. At Levin Papantonio, we handle these cases on a contingency fee basis, meaning you pay nothing unless we recover money for you.
Levin Papantonio is one of the nation’s most respected law firms for investor protection and securities fraud claims. For decades, our attorneys have taken on major brokerage firms, financial advisors, and Wall Street institutions on behalf of everyday investors. We know how to investigate churning and excessive trading, and we understand the strategies firms use to hide or defend these practices.
When you work with us, we will:
You deserve honest investment advice—not trading designed to benefit your investment advisor.
If your account shows constant trading, rising costs, or unexplained losses, it’s time to get answers. Reach out now for a no-cost, confidential evaluation from Levin Papantonio’s securities and investment fraud lawyers.
For over 70 years, our firm has stood up for people harmed by the misconduct of individuals, corporations, and other powerful entities. Clients choose us because they know we deliver.
Nationally respected trial attorneys. We’ve secured billions of dollars in recoveries for clients across the United States.
No recovery, no fee. You won’t owe us anything unless we win compensation on your behalf.
Local roots, nationwide impact. From our home base in Pensacola, we represent investors in fraud cases throughout the country.
Service built around you. We guide you through every stage of your case, making sure you understand your rights and every path forward.
At Levin Papantonio, our Securities and Investment Fraud team helps investors spot excessive trading, analyze account activity, and take action when investemtn advisors break the rules. We know how to uncover hidden fees, inflated commissions, and trading patterns that signal fraud.
SOURCES:
Churning | Investor.gov
churning | Wex | US Law | LII / Legal Information Institute
Understanding Churning in Finance: Definition, Types, and Prevention
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