PORTFOLIO CHURNING LAWYERS BASED IN NEW YORK

Sound Legal Advice & Guidance for Clients Nationwide

Portfolio churning refers to an illegal activity where your stockbroker makes numerous transactions across your portfolio to generate commissions. Stockbrokers are paid a commission for every transaction that they undertake, making this practice potentially lucrative for an unscrupulous broker. If you have been the victim of this kind of illegal practice, Weltz Law can help. We have seasoned securities account churning attorneys who are familiar with securities litigation and can help you get compensated under the law.

Talk to us today and let us help you get your money back. Call (877) 905-7671.

What Is Portfolio Churning?

According to the Securities Exchange Commission’s rules, stockbrokers are supposed to act in the best interest of their clients. This means that before your stockbroker changes your portfolio position, they must have a good reason to believe that this is the best move for their clients. However, this is not always the case. Stockbrokers may sometimes change their client’s portfolio positions to generate commissions for themselves. When this happens, it is called portfolio churning and is prohibited by the SEC under SEC rules (15c1-7) and securities laws.

Proving Portfolio Churning

Given that the primary role of a stockbroker is to make transactions that benefit the client, it is often hard to prove that portfolio churning has taken place. If a client notices that their commission payables are increasing without a corresponding improvement in their stock positions, then there might be grounds to suspect that portfolio churning is happening. Investors may also use what is known as the portfolio turnover ratio to determine if portfolio churning is taking place. This ratio divides sales (or purchases) of stocks by the net assets of the funds. If transactions worth $300,000 were carried out in a mutual fund worth $1m, then the portfolio turnover ratio is 30%.

Damages for Portfolio Churning

In the hands of a skilled securities litigation lawyer such as Weltz Law, a victim of portfolio churning might be able to recover the financial losses that they have suffered. There are two options that are available for victims of such fraudulent acts. The first is arbitration, a process that is coordinated by FINRA. It is advisable for victims of fraud to have legal counsel during this process. The other option is through court litigation where the victim files a claim against the stock brokerage firm in question. If successful, victims are able to recover the commissions lost as well as other financial losses that they may have suffered as a result of the illegal action by the brokerage firm.x