The Broker-Dealer Task Force and Office of Investor Education and Advocacy (OIEA) of the United States Securities and Exchange Commission (SEC) issued a joint Investor Alert on Monday, January 9 to help educate investors about their brokerage accounts, specifically about the warning signs of excessive trading and what they can do if they are notified of an increased level of account activity by their brokerage firm.
How Can I Identify Excessive Trading?
An important step all investors can take is to consistently review your online account, trade confirmation and account statements. Some of the warning signs to look out for include:
- Excessive Fees: Pay close attention if certain sections of your portfolio are consistently generating higher fees, especially if they seem higher than expected.
- Frequent Trading: Stay alert for signs of numerous in-and-out sales and purchases of securities that appear to be inconsistent with your risk tolerance and investment goals.
- Unauthorized Trading: Contact your firm immediately if you notice any trades made in your account that you did not give authorization to your broker to make.
Even if the overall value of your account goes up, that doesn’t mean that excessive trading didn’t take place. It’s important to note that your online account, trade confirmations and account statements don’t contain information on every fee incurred. You will need to speak with your broker to receive all of the information you need. Any time you have a question about the reasoning behind a trade or why you incurred a fee, contact your broker so they can explain.
My Brokerage Firm Alerted Me To High Levels of Trade Activity. What Now?
Brokerage firms may reach out to investors if they notice an increased volume of trade activity in order to ask that you give your approval for how your broker is handling your account or to acknowledge that the activity is acceptable. Even if you are satisfied with the results, you should take the time to speak with your broker and have them explain:
-What investment return your account need in order to cover the fees generated through the activity.
-How many transaction fees or commissions you paid over the past month, year, etc.
-Why the actions your broker took benefits you and helps move you closer towards your investment objectives.
After speaking with your broker, it may be in your best interest to contact your brokerage firm’s compliance department or with your broker’s manager to get a better understanding of the trades made in your account, and how they fall in line with your risk tolerance and investment goals.
I Believe That My Broker Performed Excessive Trades In My Account. What Can I Do?
If you believe that your broker has engaged in excessive trading, it may be in your best interest to contact an experienced investment fraud attorney. At Meyer Wilson, we have helped approximately 1,000 clients over nearly two decades, and have successfully recovered hundreds of millions of dollars and verdicts and settlements over that time. Give us a call at one of our four office locations to speak with a member of our firm, or fill out our online form to start out with a free case evaluation. Every case we accept is handled on a contingency fee basis, which means that you won’t be required to pay any legal fees until we help you recover your losses.