How to spot a broker who is churning an account


Investing money can be a good way to increase people’s income and wealth, but it also carries great risk. Most people don’t have the knowledge of the financial markets necessary to manage their risks. Many New Yorkers have brokers whom they entrust to make prudent investments that meet their investment goals.

Brokers may need to buy and sell different stocks or make other investment decisions. This is important to do in order to ensure the account is invested in the way that best benefits the investor.

It is also the way that many brokers earn their money. They receive fees for each transaction that they make in the account.

While some buying and selling is normal and good for accounts, excessive transactions can cost investors money because they are required to pay excessive fees to the brokers. If brokers are making transactions simply to earn fees it is known as churning an account and it can be illegal.

Signs that a broker is churning an account

As stated above, it is usually necessary for accounts to have some transactions, so sometimes it can be difficult to determine if the transactions become excessive. There are certain signs that people can look for if they suspect their broker is churning the account. Those signs include, but are not limited to:

  • Unauthorized transactions in their accounts that they are not aware are occurring.
  • Frequent transactions that do not appear to be in accordance with their investment goals.
  • Higher fees than people are accustomed to having or a particular portion of their account always seems to have high fees.

If people suspect that their broker is churning their account, it is important that it is stopped and the broker is held accountable for their actions. Experienced attorneys understand how brokers churn accounts and commit other illegal acts.