Saturday, Feb 28th

Last update:05:18:56 PM GMT

Your Investments - Beware of Churning

E-mail Print
Share

greed

Danger! Unscrupulous GREED heading your way. Your financial adviser (aka. stockbroker) contacts you often and persuades you to buy-sell, buy-sell in your stock portfolio or retirement account; this form of repetitive and excessive trading activity is called Churning and is a direct violation of Federal and State Securities. The ultimate goal of churning is to generate commissions which goes directly into the pocket of your financial adviser/broker because in churning, the only winner here is your financial adviser.

The SEC (Securities and Exchange Commission) defines “churning” as “the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives.” If your broker has been aggressively trading your account (or urging you to trade your account) directing a high volume of trades that make money for him but not for you, there is a good chance that he (or she) is guilty of churning the account.

FINRA (Financial Industry Regulatory Authority), the self-regulatory agency of the financial industry, has strict rules against churning, which is a violation of the broker’s duty to only make investment recommendations that are suitable for the client’s investment objectives. Churning often occurs at the end of a quarter, year, or sales promotion period, when brokers may have an incentive to run up commissions in order to reach a sales goal, to win a sales contest, or qualify for a higher percentage or bonus. Brokers who are contemplating a move to another firm also have a particular incentive to churn accounts, because their compensation at the new firm is typically based upon their previous production.

Many churning cases also involve unauthorized trading, because a broker is not legally permitted to make a trade on behalf of a client without prior approval as to the name of the security and the amount to be purchased—unless the broker has a power of attorney, which is rare. Often unscrupulous brokers will gain the confidence and trust of a client and then assume de facto control over the account without proper legal authorization, which is fraught with the possibility for excessive trading and other abuses.

According to investor’s rights attorney Craig T. Jones, “if the equity in an account is completely turned over more than once or twice a year, there is a good chance that the account is being excessively traded to generate commissions.” Jones, is a partner in the Atlanta law firm of Page Perry, LLC, which represents investors in securities industry arbitrations all over the country – many of which involve allegations of churning and other unsuitable trading. “There are court decisions,” says Jones, “that have held that there is a rebuttable presumption of churning if the annualized turnover rate in an account is greater than 6—for example, if the account was being traded so aggressively that it would turn over more than 6 times if that level or trading were maintained for a full year.” Many experts have concluded that a much lower turnover rate qualifies as churning. Link

Churning keeps a portfolio constantly in flux - always moving. 

Beware of full service brokers from major firms (such as the Merrill Lynches, Morgan Stanley MSDW and Janney Montgomery Scott of the world), who generate 100% of their income by means of commissions. These are the fees that you and I (the unsuspected client) pay each time you make an investment transaction. The more trading that occurs in your portfolio, the more fees and commission it generates for your stockbroker. You might as well cut a hole in your Lee Jeans because you are bleeding money.

There is an inherent conflict of interest between the investor and his financial advisor. A built in incentive exists to over-trade a client’s account and often the temptation is too great for financial advisors to resist.  The more trading that occurs in an account the greater the fees and commissions to the advisor.  The advisor customer relationship is one of the few professional relationships where the interests between the parties are diametrically opposed.

Stockbrokers and financial advisors have a built in incentive to trade a client’s account because it will increase the compensation in the broker’s pocket at the direct expense of the investor. Brokerage firms have an incentive to look the other way because the trading creates compensation for the firm as well.  Fortunately for investors, most state securities acts prohibit either excessive trading or churning. Link

The job of your financial adviser is to improve your LONG-TERM financial health by prudently investing your savings. Any adviser who constantly persuades you to buy and sell funds is breaking the first rule of investment: Never Lose Money. If you just started investing or have a small stock portfolio of less than 100K, a good financial adviser should be minimizing expenses such as sales commission and fund switching fees. These expenses are a LOSS to your portfolio (but a GAIN for your broker) whether the market is up or down. Basically, your adviser should setup your portfolio with a strong foundation at the very beginning and you should NOT be hearing from him or her to make changes for months (or even years).

In conclusion, financial advisers engaging in churning absolutely do NOT have your best interest. They suffer from an insidious disease = GREED. Your adviser can be your neighbor, your best friend, your future in-laws or even a family member, like your Sister - if there is a history of selfish Greed, be sure to be suspicious of their repeated recommendations to make trades within your account. If you follow his or her advice, you will lose your investment Pearl around your neck. The solution is to immediately move your account away from unscrupulous advisers and seek out accounting or legal advice.

Greed! Screw family or friendship, all these people see is money, money, money!

Comments  

 
+1 # RE: Your Investments - Beware of ChurningAnnmarie Velasco 2012-05-01 05:29
I've given up on Wall Street! They are not human beings! they are leeches and blood sucking parasites!
Reply | Reply with quote | Quote
 
 
+1 # amisymachineryJenny Amisy 2012-05-11 22:31
That is why I will vote democrat in the next election cycle.
The Republicans feel Greed by Corporation & Wall Street & Billionaires are honorable and a form of capitalism.
Greed by the poor and the middle class are wrong and destroying Ammerica!
Reply | Reply with quote | Quote
 
 
+1 # amisymachineryJenny Amisy1 2012-05-11 22:34
Money is not the root of evil, greed is.
Its one of the 7 deadliest sins!
and Wall Street capitalizes on it.
Reply | Reply with quote | Quote
 
 
0 # RE: Your Investments - Beware of ChurningPhillis Kang 2012-06-07 00:56
I don't invest with these large brokerage firms! They are exactly like the Insurance Companies - they don't give a shit about you, they exist to make money for themselves. If they can find a way to screw you of your assets - they will.
Always follow the creed - Buyers Beware!
Reply | Reply with quote | Quote
 
 
0 # RE: Your Investments - Beware of Churning yeah 2012-10-03 05:50
I agree.
Reply | Reply with quote | Quote
 
 
0 # cheap monster beatsbeats by dre clearance 2013-09-16 02:22
cheap monster beats Before I tell you about my experience, cheap monster beats let me tell you a bit more about these headphones. beats by dre solo According to the information I’ve read, Dr. beats by dre solo Dre worked with Monster Cable and Robert Brunner, dre beats an industrial designer, dre beats for more than two years to perfect these headphones. beats by dre clearance In Dr. Dre’s words,People aren’t hearing all the music beats by dre clearance.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorสมัคร sbobet 2014-11-11 07:24
I constantly spent my half an hour to read this weblog's posts all the time along
with a mug of coffee.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Coloronline cialis canada 2014-12-13 12:28
Appreciate the recommendation. Let me try it out.



Look at my web blog: online cialis canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcialis european pharmacy 2014-12-16 03:24
I enjoy what you guys are up too. This sort of clever work and coverage!
Keep up the awesome works guys I've incorporated you guys to blogroll.



Take a look at my weblog: cialis european pharmacy
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Coloronline prescription 2014-12-19 06:48
Howdy! This post couldn't be written any better! Reading through this post reminds me
of my old room mate! He always kept talking about this.
I will forward this write-up to him. Fairly certain he will have
a good read. Many thanks for sharing!

my page ... online prescription
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorgeneric cialis canada 2014-12-23 17:27
My relatives all the time say that I am killing my time here at web, except I know
I am getting knowledge daily by reading such pleasant
posts.

Visit my blog generic
cialis canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcialis over counter 2014-12-24 23:40
I could not refrain from commenting. Perfectly written!

Feel free to visit my website; cialis over counter
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcialis and canada 2014-12-30 11:16
I visited multiple web sites but the audio quality for
audio songs current at this site is truly wonderful.


My web blog - cialis and canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcheap viagra from canada 2014-12-30 14:48
I love it whenever people get together and share views.

Great site, keep it up!

Here is my web page: cheap viagra from canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colornorthwest pharmacy canada 2015-01-02 10:11
I got this website from my friend who informed me about this website and
at the moment this time I am browsing this web site and reading very
informative articles or reviews here.

Also visit my homepage northwest pharmacy canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorgeneric cialis in canada 2015-01-03 23:36
I'd like to find out more? I'd love to find out some additional information.

Here is my web page: generic cialis
in canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorgeneric for cialis 2015-01-10 23:08
When I originally commented I clicked the "Notify me when new comments are added" checkbox and now each time a comment is added I
get four emails with the same comment. Is
there any way you can remove me from that service?

Appreciate it!

Also visit my page ... generic for cialis
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorbuy cialis from canada online 2015-01-13 14:23
Howdy! Would you mind if I share your blog with my myspace group?
There's a lot of people that I think would
really enjoy your content. Please let me know.
Many thanks

Look at my blog post: buy cialis from canada online
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of ColorCialis buy canada 2015-01-17 03:49
At this moment I am going to do my breakfast, afterward
having my breakfast coming over again to read more news.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of ColorBuy cialis online canada 2015-01-17 14:29
This paragraph will assist the internet viewers for setting up new website or even a
weblog from start to end.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of ColorWalmart pharmacy cialis 2015-01-17 15:57
I visit each day a few blogs and blogs to read articles, however this weblog gives quality based articles.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcialis online pharmacy 2015-01-21 01:12
Thanks for finally writing about >UrbanSwirl.com - Lifestyles of Color
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcanadian drugs online 2015-01-22 05:37
I am sure this paragraph has touched all the internet visitors,
its really really good piece of writing on building up new website.
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorgeneric cialis canada 2015-01-22 13:03
The General pharmacy is basically cost-effective if you are from no matter which parts
of the world. The fee is affordable for anyone and everyone;
you need to aspiration of purchasing it. One time verdict is completed,
check for the perfect hold. Once finding the treatments, you have got used it.

Just take the medications with plain h2o. canada drugs online
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorprescription medication 2015-02-04 02:28
Have you ever thought about including a little bit more than just your
articles? I mean, what you say is fundamental and
everything. Nevertheless just imagine if you added some great photos or videos to give your posts
more, "pop"! Your content is excellent but with
pics and clips, this website could definitely be one of the most beneficial in its niche.
Excellent blog!

Feel free to visit my web blog - prescription medication
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colordrugs canada 2015-02-14 22:05
Thankfulness to my father who told me regarding this webpage, this blog is truly amazing.


My web blog; drugs canada
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorcialis from online pharmacy 2015-02-19 15:56
Hello, always i used to check blog posts here in the early hours
in the dawn, as i like to find out more and more.


Here is my page - cialis from online pharmacy
Reply | Reply with quote | Quote
 
 
0 # UrbanSwirl.com - Lifestyles of Colorbuy cialis from canada 2015-02-23 03:38
This is really attention-grabbing, You're a very
skilled blogger. I have joined your feed and stay up for seeking more of
your great post. Additionally, I have shared your website
in my social networks

Here is my website: buy cialis from canada
Reply | Reply with quote | Quote
 

Add comment

Security code
Refresh

Latest Comments

From the Forum

Article Roundup

What's causing record air polution in Wyoming?

Wyoming has huge open spaces, scenic vistas and the sky is not as blue as it use to be. As ...

Read more

The Last Presidential Debate - McCain Lost Again

The last of the presidential debates was last night...and I learned one single thing, that McCain needs anger management....

Read more

Leaking of a CIA Agent Identity is a Federal Crime

The outing of a covert CIA Agent - Valerie Plame Wilson - is a Federal Crime! This unauthorized leaking of ...

Read more

Philly Flash Mobs Draw Curfews For Teens

News image

It always happens.  Someone takes something too far and ruins it for everyone.  Flash mobs are supposed to be funny, or...

Read more

California Jenny Oropeza Wins Her Seat

News image

Incumbent Democrat Jenny Oropeza wins her own 28th District Senate Seat. She wins 58% to 36% over her Republican challenger, Jo...

Read more

Group of Women Arrested for Participating in Sex Contest

A sex contest?  Now that's a new way to put it. Nine UK tourists are under arrest for participating ...

Read more

Tiger Woods Falls On His Sword In Public

News image

Tiger Woods does everything big.  In golf, he wins big.  When he cuts a business deal, big contracts and big mo...

Read more

Palin Economics 101

Katie Couric had the unique opportunity to interview the unobtainable Sarah Palin in New York. Here's Katie's question on the ...

Read more

THE NEW $5 BILL. LINCOLN GETS A MAKE OVER

ABE LINCOLN - WELL KNOWN AS THE MOST UNATTRACTIVE PRESIDENT IS FINALLY GETTING THE MAKE OVER HE DESERVES AND FRANKLY ...

Read more