7 years Ago, MarcWites
Most stockbrokers and investment advisers are paid based on a percentage of the value of trades of the investments in your portfolio. (This does not apply to brokers who trade “managed accounts” or who are paid based on the total assets in an account.)
When stockbrokers are paid commissions, these amounts are deducted from your investments. Therefore, it follows that the more trades made by such brokers, the more they earn. Honest brokers, who function for your best interests, will make or recommend only trades which are necessary to maximize the performance of your holdings.
However, when paid based on your trades, there is a temptation fordishonest brokers to try to earn extra money by making more trades, even if this is not the best strategy for your portfolio. “Churning” is the excessive buying and selling of stocks or other investments motivated by the broker’s desire to increase commissions as opposed to your best interests. This excessive trading is unethical, a violation of securities law, and may give you the right to seek compensation from your broker. In addition, excessive trading of your holdings may be illegal even if it was not motivated by your stockbroker’s desire to increase commissions.
A trusted adviser with expertise on these issues, such as an attorney experienced in stockbroker fraud and securities fraud, can help you to determine whether or not you might have a claim against your stockbroker. They will need to review your account statements to determine the frequency and volume of trades and whether the trades were logically related to your investment goals. The attorney may consult with an accounting expert to evaluate the case, and figure out what can be proved with regard to your “damages” – meaning the amount you could recover, including any losses to your portfolio resulting from the unauthorized trades and the commissions paid to your broker as a result of improper trades.