Typical Securities Claims

Churning

Call 800-718-1422 or email [email protected]

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Churning

Churning, in its most basic form, occurs when a stockbroker/financial advisor buys and sells securities for and account, without regard for the customer’s investment interests, for the purpose of generating commissions. Churning can involve almost any kind of security ─ stocks, options, bonds, mutual funds or variable annuities. It is an unethical and illegal practice that violates both federal and state law.

Churning is often accompanied by the use of “margin.” Trading on margin means that one is borrowing money from the brokerage firm in order to buy securities. Margin can also be used when one withdraws cash from an account that does not actually have any cash. In that situation, the investor is using the securities within an account as collateral to secure a loan. Of course, any time margin is employed, an investor is required to pay interest.

While there are quantitative measures for churning, these measures alone may or may not reflect churning. In general, frequent buying and selling of securities that does little to meet the client’s investment objectives may be evidence of churning. Churning may cause substantial losses in the client’s account.

The two most common methods for determining whether an advisor has churned or excessively traded a client’s account are analyzing the turnover ratio and the cost to equity ratio of the account. The “cost to equity ratio,” is the total commissions and fees divided by the average net equity of the account. This figure represents how much a portfolio must generate in profit just to break even

David A. Weintraub can help determine whether this or other areas of investment-related offenses were committed.

Typical Securities Claims

  • Breach of Fiduciary Duty

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    Breach of Fiduciary Duty

    Fiduciary Duty is a legal obligation of one party to act in the best financial interest of another – to place another’s interests first – to make the client’s interests paramount. Read More

  • Unsuitability

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    Unsuitability

    FINRA's suitability rule states that firms and their associated persons “must have a reasonable basis to believe” that a transaction or investment strategy involving a recommended security is suitable for the customer. This reasonable belief must be based on Read More

  • Failure to Diversify

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    Failure to Diversify

    Failure to diversify means that a Stockbroker or Financial Advisor fails to recommend an appropriate allocation of one’s assets into different investment asset classes. Read More

  • Churning

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    Churning

    Churning, in its most basic form, occurs when a stockbroker/financial advisor buys and sells securities for and account, without regard for the customer’s investment interests, for the purpose of generating commissions. Read More

  • Unregistered Stockbrokers and Unregistered Sales Assistants

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    Unregistered Stockbrokers and Unregistered Sales Assistants

    By law, stockbrokers and certain sales assistants must be registered with FINRA and with state regulators. If they fail to meet this requirement, an investor may have the right to cancel a purchase or sale. Read More

  • Unregistered Securities

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    Unregistered Securities

    Before securities, such as stocks, bonds and notes can be offered for sale to the public, they first must be registered with the Securities and Exchange Commission and/or a state regulator. Read More

  • Concentrated Positions

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    Concentrated Positions

    If you have a large percentage of your assets invested in a single stock or bond, a small number of stocks or bonds, or even a single sector of stocks or bonds , then you have a concentrated position. Concentrated positions expose the investor to significantly greater risk Read More

  • Negligence

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    Negligence

    Negligence occurs when a financial advisor or stockbroker breaches a general duty of care resulting in damages.Just like the victim of an auto accident may be entitled to sue the driver who was at fault, the victim of a stockbroker’s negligence may also be entitled to seek relief. Read More

  • Unauthorized Trading

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    Unauthorized Trading

    Unauthorized trading is the purchase or sale of securities that a Financial Advisor or Stockbroker makes for a customer without the customer’s permission. The Financial Industry Regulatory Authority (FINRA) has a specific rule that prohibits any Financial Advisor or Stockbroker from making unauthorized securities trades Read More

  • Breach of Contract

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    Breach of Contract

    When an investor has an oral or written contract with a financial advisor or stockbroker, and that person breaches their contractual obligations, they may be financially responsible for the breach. Read More

  • Breach of Third Party Contract

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    Breach of Third Party Contract

    In certain situations, you may be a third-party beneficiary of a brokerage firm’s contract with a regulator, such as FINRA. Read More

  • Failure to Follow Instructions

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    Failure to Follow Instructions

    As a fundamental element of their relationship with the customer, Stockbrokers/Financial Advisors, as well as registered sales assistants, are required to follow the customer’s instructions.  They may be liable if they fail to do so.  Read More

ALL SECURITIES CLAIMS