REVERSE CHURNING ATTORNEYS BASED IN NEW YORK

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Reverse churning occurs when a broker inappropriately places a client under a fee-based account without any good rationale for the action. Typically, brokers will do this for accounts that are slow and would otherwise generate very little money in terms of commissions. By doing this, the broker earns fees from the fund with very little input on his or her part.
If you suspect that you are a victim of reverse churning, Weltz Law can help. Our account churning lawyers have years of experience litigating reverse churning claims and you can be sure that your case is in good hands. Call (877) 905-7671.

What Is Reverse Churning?

Stockbrokers normally maintain two types of accounts. The first is the commission-based account where investors pay a commission for every transaction that the broker undertakes on their behalf. The second kind of account is the fee-based account where the broker earns a flat fee regardless of the number of transactions that the account undertakes. If an investor does not undertake a lot of transactions, then the commission account is the best option. On the other hand, if the account has frequent transactions, then the fee-based account works best. Reverse churning is when unscrupulous brokers place a portfolio with a low turnover into a fee-based account to increase the amount of money they earn.

Proving Reverse Churning

It is often very difficult to prove that reverse churning has taken place, but an experienced securities litigator can often get it done. One indicator that you might be a victim of reverse churning is if your stockbroker requests to move your account to a fee-based plan with very little or no explanation about why it is necessary. Another possible indicator is what experts call ‘double-dipping.’ Here, the stockbroker ‘churns’ the account to generate as many commissions as possible and then moves the account to a fee-based plan. This ensures that the brokerage firm continues to make money from the account without arousing suspicion.

Damages for Reverse Churning

When a case of reverse churning is proven, there are various options that are open to the victim. In many cases, the court will ask the broker to refund all fees, damages for any losses incurred due to the broker’s misconduct and interest accrued. Proving reverse churning however is not easy and this is why victims are always advised to seek help from an experienced securities litigation lawyer. Whether you choose to pursue arbitration or a court process, it is important to have experienced litigation attorneys by your side.