Excessive Trading Activities
Investment advisers come from many professions: of course we start with stockbrokers and financial advisors but many accountants, insurance sales professionals, and investment counselors from banks provide services to investors. Anyone of those investment professionals can cross the line into excessive trading activities. Some investors invest in insurance, others in real estate ventures, and others in private placement investments and IPOs. Whenever trading activities in any of these mediums crosses a line from acceptable volume to unacceptable volume it falls in the excessive trading activities category.
Stockbroker misconduct involving excessive trading activities is best viewed from the perspective of a time analysis. If over time the volume and frequency of trading increases the question becomes is this excessive? If your stockbroker, financial advisor or investment counselor places you in appropriate investment vehicles and then accelerates the transaction rate or the turn-over rate it can become excessive, but that may not be churning. Churning claims involve trading to generate fees for the stockbroker, investment counselor or financial advisor. Churning activities are serious stockbroker fraud claims. Do not confuse excessive trading with churning: many security investment fraud lawyers lose claims for churning, when the correct claim falls under excessive trading activities. Stockbroker fraud lawyers often become excited at the prospect of significant recoveries by making churning claims, which ultimately resolve in arbitration in favor of the stockbroker or financial advisor. It is a more conservative approach, and more likely to result in an arbitration award, to characterize trading activity as excessive without alleging churning. Arbitrators in churning claims will focus on the generation of fees and income to the financial advisor, stockbroker, in any arbitration for stock broker fraud. If your stockbroker fraud attorney cannot establish and clearly demonstrate the motive for the transactions was for the purpose of generating fees, your claim for churning will fail. An experienced stockbroker fraud attorney will explain to you the difference between and excessive trading and churning. Churning is more malicious, and venal. Churning involves proving the motive of fee generation eclipsed any rational explanation for the volume or appropriateness of the individual investments.
You can be a conservative, low risk investor living in Florida, Boca Raton or Fort Lauderdale, and be the victim of excessive trading practices. Your stockbroker fraud attorney in his arbitration presentation should use charts and flow graphs to demonstrate the accelerating rate of trading in any excessive trading stockbroker arbitration. Don't be blindsided by the lure of a churning claim when the underlying activity may be an appropriate financial investment only done to excess.