Investment Losses from Excessive Trading
You are investing in the markets to grow your money and get a better return. You don’t know a lot about trading and rely on your financial advisor or stockbroker to guide you. The problem is that their investment advice causes you losses, and you don’t understand how this can happen. You look for answers and the only thing that makes any sense is the large commissions you were charged to buy and sell.
You try contacting your financial professional for an explanation, but all you get is the runaround. Things become even more confusing with the markets’ experiencing lots of volatility. You are not sure what to do or who can help you.
These situations are not uncommon for many investors that are facing significant losses from the recent market volatility. Your financial professional and their firm have a legal obligation to make sure all trades match your investment objectives. This is the information you gave to the firm when first opened your account. They asked you questions about your risk tolerance, net worth, liquidity, and goals.
Your advisor or broker is supposed to make recommendations that match these goals. The firm has a responsibility to catch these trades and prevent them from going through if they don’t match your investment objectives.
The only purpose of churning or excessive trading is to generate commission for the broker or advisor and the firm. These practices go back many decades, and they are banned by the Financial Industry Regulatory Authority (FINRA). FINRA regulates the stock market and securities industry.
FINRA has specific policies that ban excessive trading from happening. FINRA’s new rule known as Reg. BI requires brokers, advisors, and firms to always look out for your best interests.
Excessive trading and the losses you are experiencing are in direct violation of these standards. You have the option of taking legal action against the firm and the financial professionals involved.
The Wolper Law Firm, P.A. can help. We are an excessive trading loss practice that has a proven track record of getting results for our clients. We have a 99% success rate in recovering money for wronged investors in the cases we handle. Contact us now at 954.406.1231 / 800.931.8452 to schedule your free consultation with an excessive trading loss lawyer.
What is Excessive Trading?
Excessive trading or churning is when your broker or financial advisor will make unnecessary trades to generate commissions and fees. The broker/advisor and the firm will benefit from these trades while the customer takes losses.
Many times, excessive trading is touted as a way to take advantage of price disparities in the markets. Financial professionals point out how easy it is to “pick the market’s pocket” and take advantage of the huge price swings.
The problem is that excessive trading will eventually get you into trouble. This is because the markets are constantly changing; trying to capture the next trend or predict the future is something no one can do. Rely on proven strategies that have withstood the test of time to reach your financial goals.
Things get more complicated when you take a look at how the emotions of fear and greed drive trading. This adds volatility to your investments, and it makes identifying excessive trading more difficult. Everything may look promising, but you could be on the wrong side of a trade and not know about it until later. This happens frequently in the financial markets, and it is why FINRA has banned the practice.
The firm is required to monitor for excessive trading by looking at the number of trades in the account and comparing the trade to the investment objective. The firm’s compliance department reviews all trades and flags those that are questionable. This is to prevent excessive trading and keep the broker or financial advisor from taking advantage of you.
According to FINRA, you will see common signs of excessive trading in your account including:
- Lots of short-term trades: Financial professionals tout short-term trading as a great way to make money in the markets. The reality is that it increases your risks and the potential for significant losses. Your broker charges you commissions on every trade and encourages you to do this kind of trading.
- Review all of your financial documents: One of the biggest mistakes that most investors will make is they don’t look at the fine print. This is problematic, as they don’t know their investment objectives or how their case will be handled if there is a dispute. We recommend taking the time to read all of the information and ask questions if you don’t understand. Document your risk, investment objectives, and time horizon. You should compare this with the trades you are making and the frequency.
- Watch the commission and fees: Be sure to look at the commission and see whether it is above 5%. FINRA set this as a guideline, but it should be well below this amount. You also want to look at how much money you made versus what the financial professional charged in commissions and fees. Sometimes, your broker will hide the commission by doing the trade as a principal transaction. This is when the firm is taking the stock out of its inventory and is reselling it to you. They will charge a markup or markdown when you are buying or selling. You will see this quoted in fractions such as ½. On a 1,000 share trade, this is $500 you are paying in commissions.
We recommend watching your account for any suspicious activity.
FINRA is cracking down on excessive trading, and we can help you if you are the victim of it. Our team of skilled attorneys has experience working with excessive trading claims and getting results for our clients.
We have a 99% success rate in getting money for wronged investors in the cases we handled. Our clients give us five-star reviews because of the knowledge and experience we use to hold the financial professional and the firm accountable.
Contact the Wolper Law Firm, P.A. now to speak with a skilled attorney at 954.406.1231 / 800.931.8452. Our free consultation is a chance to go over your investment losses for excessive trading. You have nothing to lose and everything to gain by learning about your options.
Why Choose Us?
The Wolper Law Firm, P.A. will give your case the attention it deserves. We treat you with respect and listen to what you have to say. You are more than just a number to us, and your excessive trading loss attorney will always keep you in the loop about what is happening.
Our strategies get results, and we know what to do to hold the brokerage or advisory firm accountable for their actions. We have a 99% success rate in getting money for our clients in the cases we handled. Our team will not stop until we create successful outcomes for you.
The Wolper Law Firm, P.A. was founded by Matthew Wolper. He worked as legal counsel for the big Wall Street firms for 14 years. Matthew grew tired of these firms using their deep pockets to buy their way out of trouble. He started our firm to level the playing field for investors and give them the same resources as the Wall Street firms.
We are attorneys that work as your advocates with FINRA to show how you are the victim of wrongdoing. Our team will work tirelessly to investigate, gather, and use the evidence we collect to hold the financial professional and the firm accountable.
Contact us now at 954.406.1231 / 800.931.8452 to schedule your free consultation with a skilled excessive trading loss lawyer. We will go over your case and discuss the different options that we can pursue. You have rights, and FINRA has regulations that are designed to protect you. Our team will find out if these regulations were violated and hold those responsible for your losses accountable.
FAQs
Excessive trading is when a broker or financial advisor makes unnecessary trades in the customer’s account to generate commissions for themselves and the firm. Firms have a duty to watch out for excessive trading and are taught how to spot it. Failing to act makes the firm liable for failing to prevent it and make sure that all trades align with your investment objectives. We recommend contacting us right away if you feel you are the victim of excessive trading. Time is of the essence, and fast action will prevent things from becoming worse.
You will see several signs of excessive trading activity in your account. These include lots of short-term trades, investments that are inconsistent with your objectives, and high commissions. The commissions will be high anytime you are buying or selling. We recommend speaking with a skilled attorney if you feel you are the victim of excessive trading. Our team will evaluate what happened and give you the different options we can pursue to hold the financial professional and firm responsible.
Yes. Excessive trading is illegal because it violates the intent and spirit of the advisor’s fiduciary duty. They must act in the client’s best interest by giving them prudent and objective advice. The commissions and fees they make are considered to be secondary to the customer’s needs. FINRA has banned this practice and takes aggressive disciplinary action against brokers engaging in it.
The first thing you should do is voice your concerns to the firm and document everything in writing. We recommend sending the firm a letter notifying them of the problem and asking them to resolve the situation. You also want to contact us, but don’t mention that you are speaking with an attorney. We will give you advice and help you to manage this situation without tipping anyone off. Our team has the knowledge and experience to get results for you. We will contact the firm and regulators on your behalf to make sure that your rights are respected.
The best approach is to know your rights and what actions are considered to be acceptable. We recommend doing some research on the broker or advisor with FINRA’s broker check. This will give you disciplinary information on the individual and the firm. You should regularly review your statement and monitor for any unusual trades in your account.
Attorney Matthew Wolper
Matt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks.
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