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What is churning?
Churning occurs when a broker exercises control over your account (i.e. you rely on his advice to buy and sell), excessive trading takes place and the broker puts his own interest of generating commission for himself in front of your interest.
Factors of control include:
[] identity, age, education, intelligence, and investment and business experience of the customer;
[] relationship of the broker and customer;
[] customer's sophistication of the market;
[] regularity of discussions between the broker and customer;
[] whether the customer authorized the trades; and
[] who made the recommendations for the trades.
Regarding excessive trading, courts and arbitration panels generally look at some type of turnover rate, which indicates the account's trading volume in relation to its size.
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