Churning

Churning

Excessive trading of a client's account in order to increase the broker's commissions.

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Churn

To make both buy and sell orders through different brokers, usually in large quantities, to create the impression of increased interest in a security and thereby raise its price. An investor churns if he/she has a long position on the security and wishes to sell it at an artificially high price. Churning is a form of manipulation, and is illegal under the Securities Exchange Act of 1934. See also: Fix.

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Churning. If a broker intentionally mishandles buying and selling securities in your investment account, it's known as churning.

The broker might buy and sell securities at an excessive rate, or at a rate that's inconsistent with your investment goals or the amount of money you have invested.

One indication of potential churning is that you're paying more in commissions than you are earning on your investments. Churning is illegal but is often hard to prove.