Brokers have a duty to place their clients' interests ahead of their own. When a broker engages in excessive activity, typically for the purpose of generating additional commissions, the broker violates that duty. This violation means that both the broker and the brokerage firm may be held liable for any losses that arise out of such excessiveness.
What is excessive?
Excessiveness is typically determined by evaluating your account's annual turnover rate and the "break even" or "cost-equity" ratio of the account. According to both the SEC and the courts, a turnover rate of over 6% is excessive per se. However, with a vast majority of standard turnover rates being below 1%, excessive activity may be proven at a significantly lower rate. Standards also exist that determine that most accounts requiring at least a 15% annual return to "break even" meet the definition of "excessively traded."
However, even if it can be established that your account has experienced excessive activity, for liability to exist, an investment fraud lawyer must prove that the broker had effective control of your account. Proof of control may be established through a written document granting the broker control of your account or by showing that you relied so completely on the advice and recommendations of your broker that the broker was effectively responsible for the number of transactions in your account and their frequency.
Meyer Wilson: Your Investment Fraud Attorneys
To ensure your excessive activity claim is handled effectively, you need investment fraud lawyers with a proven track record of excellence. Meyer Wilson has years of experience practicing solely in our field, assisting the victims of stockbroker fraud as the focus of our firm. As a result, we have honed the strategies and skills needed to aggressively pursue the largest investment firms in the nation. Despite the best efforts of brokerage firms to make themselves out-of-reach of litigation, Meyer Wilson has helped over 800 clients recover hundreds of millions of dollars from the firms that mishandled their investments and assets.
Smart trading is based largely on quantifiable data. Trading simply because you've been inactive lately or trading based primarily off of impulse or hunches more closely resembles gambling than wise investing. Your financial advisor should be able to explain to you the reasons for every move they make with your hard-earned money. If they are engaging in activity simply to increase their commissions, then a stockbroker fraud attorney can step in.
Meyer Wilson has successfully served the interests of clients nationwide, including major U.S. cities like Cleveland, Los Angeles, San Diego, Dallas and Tampa. We typically help investors who have suffered financial losses in excess of $100,000. For assistance with your excessive activity claim, call an investment fraud lawyer at our firm or complete our online contact form to request your free case evaluation.