A broker typically earns a portion of the commissions or other fees on each purchase or sale of securities that the brokerage firm makes for an investor. When a broker engages in excessive buying and selling (i.e., trading) of securities in a customer’s account without considering the customer’s investment goals and primarily to generate commissions that benefit the broker, the broker may be engaged in an illegal practice known as churning.

Red flags of excessive trading may include:

• Unauthorized Trading—Be alarmed if you become aware of trades in your account that you did not authorize your broker to make.

• Frequent Trading—Be wary of frequent in-and-out purchases and sales of securities that don’t seem consistent with your investment goals and risk tolerance.

• Excessive Fees—Be suspicious if the total amount of fees seems high or if one segment of your portfolio consistently generates high fees.

If you believe a broker has engaged in churning, submit a complaint in writing to the brokerage firm and to the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).

In Utah, as in other states, churning by a broker is considered a violation of both federal securities laws and industry regulations set by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Churning occurs when a broker engages in excessive trading in a client's account mainly to generate commissions without regard for the client's investment objectives. This practice is illegal and unethical as it can erode the client's investment through unnecessary fees and be inconsistent with the client's risk tolerance and goals. If an investor in Utah suspects churning, they should document all suspicious activity and report it to the brokerage firm in writing. Additionally, they should file a complaint with regulatory bodies such as the SEC and FINRA. These organizations have the authority to investigate and enforce actions against brokers and firms that engage in such misconduct. It's also advisable for the investor to consult with an attorney who specializes in securities law to discuss their rights and potential remedies.