When you hire a financial advisor, you’re trusting them with your investment future. Financial advisors and brokers sometimes earn a commission on the trades and purchases conducted on your behalf. There may also be other fees charged to your investment account.
Know When and Why You Are Paying Commissions
It’s important to understand how broker commissions and fees work.
Some brokers and financial advisors require a minimum deposit in your brokerage account. Your broker or advisor may withdraw money from it every time a trade is executed.
In addition to commissions, some brokers and advisors charge annual maintenance and operating fees. Some brokers and advisors even charge inactivity fees if you go months without making a trade. And others charge minimum balance fees if your brokerage account dips below a certain level or amount.
Before working with a broker or financial advisor, make sure you understand what fees apply to your account and how they will be calculated.
What is Churning?
From time to time, there are brokers or advisors who engage in excessive trading simply to generate more commissions. This is referred to as “churning” and can lead to unexpected and improper losses in your financial portfolio.
Not only is churning unethical, but it is also illegal and carries fines and sanctions by the U.S. Securities and Exchange Commission (SEC) and other regulatory agencies.
Proving a churning case is not a simple process. Circumstances that can lead to liability are:
- Excessive purchases and sales of securities by the broker for the purpose of generating commissions
- Broker control over these transactions
If you believe you have been the victim of “churning,” you may have the right to recover from the broker or advisor for your losses. You should retain a competent attorney for this complicated process.
Suing a Broker or Brokerage Firm in St. Louis
There are two available paths available for taking legal action in a churning case:
- Financial Industry Regulatory Authority (FINRA) arbitration
- Judicial court system (only if FINRA arbitration is not mandatory)
You may be going up against a broker or brokerage firm with substantial resources. You will likely be confronted during a deposition or cross-examination by the other side’s legal counsel. It is essential that you are prepared to give your side of the story supported by evidence.
That is why it is important to work with a qualified legal team to pursue your rights.
In legal matters, it is important to speak to a professional familiar with the laws in your state. If you believe that you have a claim for “churning” in Missouri or Illinois, call us Ross & Voytas.
Ross & Voytas, LLC are trial lawyers with big firm experience and small firm values. We combine objective advice with the tactical know-how to obtain the compensation you deserve.
The attorneys at Ross & Voytas bring more than thirty years of combined courtroom and litigation experience to support your rights. Clients have given our St. Louis law firm multiple 5-star reviews and we handle difficult cases.
As natives to St. Louis and licensed in Missouri, Illinois, and various federal courts, Nate Ross and Rick Voytas provide knowledge and personal attention to your legal matter.
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