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  • Colleen MacFarlane

Churning is Serious Financial Misconduct

Churning can only occur if a broker has discretionary authority over the client's account. A client can avoid this risk by maintaining full control, requiring the client's permission to make changes in the account.

Churning is serious financial misconduct, but it's not easy to prove. Your best defense is to pay careful attention to your portfolio.

  • You can request that your broker discuss any buy or sell transactions with you in advance. You can explicitly sign that right away when opening the account but you can opt not to do that.

  • Whether or not you discuss transactions with your broker in advance, you will receive a written notice from everyone. That's a federal requirement. If you're receiving notifications every day or every week, you might be a victim of churning.

  • The above is particularly true if the transactions are in mutual funds, annuities, or insurance products. These are not the kinds of investments that should be traded frequently.

  • When you review your monthly statements, check how much you're paying in commissions. High total commissions mean less profit for you.




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