Principal Protected Note

How Do I Know If My Account Was Churned?

Jun 8, 2020

What Is churning?  Although most stockbrokers and investment professionals act with the utmost professionalism, unfortunately, there are always a few “bad apples” who are in it just for themselves. When a broker is trading your account simply to make commissions on the trading, this is called churning. As an investor, you need to be able to detect whether your brokerage account has been or is still being churned, and know what to do about it if you suspect you have been the victim of this activity. According to the Securities and Exchange Commission (“SEC”) churning occurs when a broker engages in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker. For churning to occur, the broker must exercise control over the investment decisions in the customer’s account, such as through a formal written discretionary agreement, although a broker can be deemed to have control without such an agreement-especially if the customer always accepts the broker’s investment recommendations. Frequent in-and-out purchases and sales of securities that don’t appear necessary to fulfill the customer’s investment goals may be evidence that your account is being churned.  Churning is both illegal and unethical. Churning violates both the Federal and state securities laws, as well as FINRA industry regulations and standards. Such conduct may also violate a myriad of other laws, such as those requiring that brokers act as fiduciaries and always put their client’s interests first. Churning also violates FINRA’s suitability rules. What Does Churning Stocks Mean? Churning Stocks There are a number of types of churning investors should watch for. The most common is when a broker makes excessive trades in stocks. Excessive trading generates commissions for the broker but provides very little if any, the benefit to the investor.  One way churning is measured is by how many times the equity in the account is traded in a year. This is called the “turnover ratio” The turnover ratio can be calculated a number of ways. The simplest turnover measure divides total security purchases by the average month-end equity balance and then annualizes the turnover ratio by dividing it by the number of years covered in the analysis. More simply put, if the average yearly value of your securities account is 100,000 and a broker executed 300,000 worth of trading in a year, the turnover ratio would be 3x. The other measure of churning is called the cost-to-equity ratio. Cost-to-equity ratios are calculated by dividing the costs such as commissions, fees, margin charges, mark-ups, and mark-downs incurred in an account by the average yearly equity. In this measure, cost-to-equity ratios calculate the portion of the average equity in the account that is eaten up by the trading costs. A simple example would be if the average equity of the account was 100,000 but the costs of the trading in the account were 10,000. In this example, the cost-to-equity ratio would be 10%–meaning that the customer would have to earn at least 10% on the trading before breaking even.  Churning Bonds, Mutual Funds, Annuities, and Life Insurance While most people think of churning in the […]

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Securities arbitration

Do You Need an Attorney for Securities Arbitration?

Apr 13, 2020

As an investor, you depend on your broker or brokerage firm to put your interests first when handling your investments. After all, that is why you chose them, because they are supposed to be experts in the field of investing your money wisely. But what happens when they fail you? What happens when they put their interests over yours? What happens if instead of your financial gain, they use your money to their own benefit instead of yours? Or, if they are negligent in making recommendations that are not in your best interests or are unsuitable for you? The answer is that you should complain about this conduct and seek damages.   If You Have a Brokerage Account, Most Likely You Agreed to FINRA Arbitration  Most brokerage firm contracts have a clause requiring that all disputes with customers be handled through FINRA arbitration. Notwithstanding this, all brokers and firms who are FINRA members are required to arbitrate their customer’s claims through their forum. So, most likely, any dispute you have with your broker or firm will be handled in a securities arbitration proceeding before FINRA. Accordingly, you would be wise to consult with a securities arbitration attorney familiar with the FINRA rules and processes to assist you in that process.  In this article, we will discuss the securities arbitration process, and what an attorney’s role in that process. If, after reading this blog, you have additional questions or feel that you may have a claim, we invite you to contact Former Wall Street attorney Melanie Cherdack. Ms. Cherdack is a securities arbitration attorney who understands the plight of those who were victims of investment fraud. She has represented hundreds of investors and has “seen it all” when it comes to the schemes that investment brokers use to defraud their clients. We invite you to contact us today on our online contact form, or by calling 888-768-2499. The Importance of FINRA The purpose of the Financial Industry Regulatory Authority, or “FINRA,” is to protect investors, regulate brokers, and guarantee integrity in all stages of the investment process. FINRA provides investors with protections and avenues for recouping lost dollars when brokers are negligent, break the rules, or cheat investors. FINRA provides the forum of securities arbitration for those wronged by brokers. It is a process that is faster than filing a lawsuit, geared towards the issues that investors have with brokers and is private. Laws and regulations governing these issues can be complex, and you will need to prepare your case, file documents, meet deadlines, know which issues are paramount to your case, figure out how to show they breached a contract or violated rules and regulations or any other numerous issues. That is why you need a good attorney to help you through the securities arbitration process.     Your Attorney’s Help During Arbitration Although you are not required to hire an attorney for securities arbitration, it is in your best interest to do so. There are numerous benefits to having an attorney assist you. Even the FINRA website suggests hiring an attorney, as follows:   “You should consider hiring an attorney to represent you […]

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Finra attorney

Can a FINRA Attorney Help Me Recover Losses from Investment Fraud?

Feb 3, 2020

You worked hard for the nest egg you have accumulated. Understandably, you want to be extremely careful about who you trust to help you invest those assets. Of course, once you choose a securities broker or securities firm, it is that much more devastating when that firm, or the individual broker, betrays that important trust.   If you are the victim of investment fraud at the hand of an unscrupulous broker, you have options. Yet, it would be wise to get the assistance of an attorney who can help you obtain compensation for the fraud or negligence of your broker or brokerage firm. Typically, in the investment-fraud world, attorneys who help fraud victims are referred to as FINRA attorneys. The reason for that is because most disputes between customers and clients of investment firms are handled via arbitration through the Financial Industry Regulatory Authority, FINRA. The process of working with a FINRA attorney is as follows. In this article, we will talk about the role of FINRA and what a FINRA attorney can do to help you recover your investment losses. If, after reading this blog, you would like to learn a little more about getting a FINRA attorney to help you with your situation, we welcome you to call Attorney Melanie Cherdack.   Former wall street lawyer Melanie Cherdack understands the plight of those who were victims of investment fraud. She has “seen it all” when it comes to the schemes that investment brokers use to defraud their clients. Contact us today on our online contact form, or by calling 888-768-2499. We are the investment fraud lawyers who will level the playing field for you.     What is FINRA? As noted, FINRA stands for the Financial Industry Regulatory Authority. FINRA does precisely what its title suggests – it regulates the financial industry. Specifically, it oversees the 3,726 brokerage firms and the over 600,000 brokers in the country. FINRA is not a government entity. It is a private, not-for-profit organization. Yet, it acts similar to a government agency in its oversight role of financial broker-dealers in the United States.   All member broker-dealers in the United States are subject to FINRA’s rules and regulations. FINRA is important to investors as it is a specific regulatory body dedicated to overseeing the complex securities industry. Rather than having a court of law adjudicate a complex securities matter, the FINRA forum appoints arbitrators who have the necessary securities or business expertise to more easily grasp the legal issues surrounding allegations of investment fraud.   That all means that if a particular broker or broker-dealer engages in conduct that violates FINRA’s rules and that  violation causes investment losses, then you as the investor have a right to file a complaint with FINRA in an effort to get compensation for your losses.   What Can a FINRA Attorney Do to Help You? A FINRA attorney can help you seek an award in your favor for any investment losses that you suffered. The FINRA attorney would, therefore, represent your interests in a FINRA arbitration. The process of working with FINRA attorney is as follows: Begin with a Case Review The first thing […]

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