Account Churning

Under normal circumstances, a certain amount of buying and selling activities will occur in a securities account. However, in some circumstances, buying and selling activity is intentionally increased in order to generate excess commissions for a broker, rather than buying and selling in a manner that is in the best interests of the investor. This practice is commonly known as account churning. The law does not specify when a specific level of buying and selling activity constitutes churning, however, increased trading generally will bring about higher risk of allegations of churning in order to generate excess commissions For churning to occur, the broker must exercise control over the investment decisions in the customer’s account, and the alleged excess sales of securities must be deemed such that they are not necessary to meet the customer’s investment goals.