Did Excessive Options Trading Lead To Churning In My Account?

As a Securities and Exchange Commission report found, options trading is highly technical and involves holding stocks for short periods of time. Given the complexity of these deals, customers frequently depend on their brokers to make almost all of their trading decisions. Unscrupulous brokers know this, and they use their customers’ reliance for churning—when a broker engages in excessive trading on customers’ behalf to generate more commissions. But churning is illegal, and brokers who have engaged in churning can be required to compensate their clients for related losses.

Because customers rely so heavily upon brokers for options trades, brokers have additional requirements for making these trades. For example, they must know the customers’ financial position, their investment goals, and their age.

And customers must understand the risks of options training. But it isn’t enough for them to understand that options trading is risky, generally speaking. The brokers should explain the risks of each specific deal. And they should weigh if their customers understand the trade and have the financial wherewithal to make it, before the trade.

If they aren’t doing all that, your broker may be using options trades to cover for churning in your account. Here are warning signs you can look for:

• Are you an inexperienced investor engaging in options trading?
• Are there rapid sales or purchases of stocks or options?
• Does your marketing material with the broker explain the particular risks for each options trade you make?
• Does your broker fail to regularly make sure they have accurate knowledge of your financial status and goals?
• Are the trades consistent with your investment goals?

If you have said yes to any of the above questions, you have legitimate cause for concern. But the good news is that if you’ve lost money from investments due to brokers engaging in these, or similar tactics, you may be able to receive compensation for your losses.

To find out more, contact Silver Law Group. Silver Law Group is a nationally recognized team of attorneys who help clients recover their investment losses due to investment fraud and other brokers’ wrongdoing. Call now at 800-975-4353 to schedule a free consultation.