The Trusted Attorney For Victims And Families

Churning and excessive fees

On Behalf of | Nov 16, 2021 | FINRA |

One way to avoid a shady broker is by checking his or her association with the Financial Industry Regulatory Authority (FINRA). In Pennsylvania, FINRA offers membership to its qualifying brokers. Finding a broker that’s involved with this agency means you’ve found a broker with reasonable honesty. Regardless, look for the following to determine if your broker is cheating.

Start with churning

Churning is a term used in the financial industry to identify when a broker is cheating his or her clients. Brokers are only looking out for their interests, and this conflict is expressed in your contract with them. However, your broker is not allowed to force you to lose money from trading.

Unauthorized trading

FINRA defines unauthorized trading as hazardous. Anytime you access your account, be sure to check your transaction history. You may first notice that your balance is lower than when you last left it, and you hadn’t traded since that time. If you wait until you receive a monthly statement, then you could overlook the unauthorized activity happening each day.

Excessive fees

Every broker, unless unknown or offering a deal, has a common conflict of interest against you. Excessive fees happen because of this conflict of interest. Since your broker is literally brokering deals, they process your order by taking the opposite position of it. The money you lose goes to him or her. Furthermore, the broker wants you to keep sending orders in as each new order generates a commission.

Unsolicited advice

The above examples of churning can be triggered through unsolicited advice. Your broker must state that you’re not getting investment advice. However, there are ways to send emails with technical analysis and trending news without you requesting it. This type of unsolicited information can influence your decisions and lead to excessive fees.

Regulated brokers in Pennsylvania

Finding a regulated broker is your best means of investing with transparency. Trading accounts consist of financial data that can be difficult to interpret. For this reason, you must watch out for churning and acknowledge how it comes about.


FindLaw Network