There are many reasons why the clients of investment professionals might take legal action. In cases where clients believe that brokers and investment advisors breached their fiduciary duty, it may be possible to hold them accountable for the impact of their questionable conduct.
In some scenarios, undisclosed conflicts of interest or incompetent trading could lead to securities litigation. Other times, clients may review trading records and accuse professionals of churning. They may seek compensation for excessive fees and investment losses triggered by unethical financial practices.
What is churning?
In the financial sector, churning involves manipulative attempts to maximize trading fees by conducting frequent trades, not all of which may be beneficial for clients. Some investment professionals charge a fee per transaction. Every time they purchase or sell investments on behalf of their clients, they may receive payment.
Investment professionals might conduct dozens of unnecessary transactions every month. Instead of managing investment holdings to maximize client stability and investment profitability, the goal is instead to generate as much income for themselves as possible.
Typically, the compensation per trade is relatively low. In some cases, churning could go on for years before clients start to question the excessive fees imposed and the seemingly random transactions performed by the investment professionals managing their funds.
In cases where clients have evidence of churning, they can potentially hold investment professionals accountable for putting personal profit ahead of what is best for them. Reviewing trade records can help clients determine if securities misconduct occurred. Credible allegations of churning can provide the basis for securities litigation that can help recover some of the losses clients may have sustained.