Churning & Excessive Trading Attorneys — Bakhtiari & Harrison

Nationwide Representation for Investors

Written and reviewed by Ryan Bakhtiari, Partner — Bakhtiari & Harrison
Admitted: CA | NY | TX | DC | Multiple Federal Courts · Super Lawyers 2005–2026 · Former PIABA President · Former FINRA NAMC Chairman · Last reviewed: August 2026

Bakhtiari & Harrison represents investors whose brokerage accounts were excessively traded by a broker or financial advisor primarily to generate commissions, a violation known as churning. Churning is a serious form of investment fraud: it erodes a customer’s investment through unnecessary fees and trading costs, and it can be actionable in FINRA arbitration whether or not the account was profitable overall. The firm has recovered more than $250 million for investors over four decades. Ryan Bakhtiari served as Chairman of the FINRA National Arbitration and Mediation Committee and as President of PIABA. Partner David Harrison is a former Morgan Stanley in-house counsel and Series 7-licensed registered representative. Investor cases are handled on a contingency fee basis — no recovery, no fee.

Excessive Trading in Your Account? Here’s What Churning Looks Like

Churning occurs when a broker engages in an excessive number of trades in a customer’s account primarily to generate commissions, rather than to pursue the customer’s investment objectives. It is a well-established form of broker misconduct: the buying and selling of securities is driven by the broker’s financial interest in generating commissions, not the client’s best interests. Because commissions and fees accumulate with every transaction, an account can be churned into a loss even when individual trades are not inherently bad picks. The volume and frequency of trading itself is the problem.

FINRA Rule 2111 describes three suitability obligations: reasonable-basis suitability, customer-specific suitability, and quantitative suitability. Quantitative suitability concerns whether a series of recommended transactions, even if individually suitable, was excessive and unsuitable when considered together in light of the customer’s investment profile. Rule 2111 does not apply to recommendations subject to SEC Regulation Best Interest.

Churning claims are typically pursued through FINRA arbitration against the broker and the brokerage firm that failed to supervise the broker’s activity. A free consultation with an excessive trading lawyer at Bakhtiari & Harrison is the most direct way to find out whether your account shows signs of churning.

Building the Case: How an Excessive Trading Attorney Proves Churning

Churning claims require detailed financial analysis of the account, not just a general sense that “too much trading” occurred. Bakhtiari & Harrison’s excessive trading attorneys build churning claims around three core elements.

Turnover rate

The turnover rate estimates how many times the securities in an account were replaced during a period. It is generally calculated by dividing aggregate purchases by the account’s average monthly investment and annualizing the result when the review period is shorter or longer than one year. A turnover rate is an evidentiary indicator, not an automatic legal test. FINRA has stated that a turnover rate of six or a cost-to-equity ratio above 20% is generally indicative of excessive trading, but lower or higher figures may be relevant depending on the customer’s objectives and circumstances.

Cost-to-equity ratio

Also known as the break-even percentage, the cost-to-equity ratio estimates the percentage return the account needed to generate to cover commissions and other trading expenses. It is generally calculated by comparing annualized account costs with average net equity. The ratio is an analytical indicator, not a conclusive test of liability.

Broker control

A churning claim also requires showing that the broker exercised control over the account, whether through formal discretionary authority or de facto control, where the customer routinely followed the broker’s recommendations without independently evaluating each trade. Evidence of broker control includes the percentage of trades that were broker-solicited versus customer-initiated, and whether the customer had the sophistication to understand the investment strategy being executed in their name.

Separate claims under FINRA Rule 2111’s quantitative-suitability obligation focus on whether the broker recommended a series of transactions that was excessive and unsuitable when viewed together; those claims may not require proof of the same control element.

Reverse Churning: When Fee-Based Accounts Are the Problem

Reverse churning is the mirror image of churning, and it is a growing area of FINRA enforcement. Rather than over-trading a commission-based account, reverse churning occurs when a broker places a customer in a fee-based advisory account and then provides little or no trading activity, advice, or ongoing management to justify the fee.

Instead of the broker profiting from excessive activity, the broker profits from excessive inactivity, collecting an asset-based fee year after year while doing little to earn it. A reverse churning attorney at Bakhtiari & Harrison evaluates whether a customer’s fee-based account was suitable for their trading pattern in the first place, and whether the fees charged were disproportionate to the services actually provided.

Recover Losses From Churning with Our Churning Lawyers

Most churning and excessive trading claims are pursued through FINRA arbitration against the broker and the brokerage firm. Brokerage firms have an independent duty to supervise their brokers’ trading activity, and a firm that ignores red flags, such as high commissions, frequent trades, or client complaints, can be liable for failure to supervise in addition to the broker’s own misconduct. FINRA arbitration is generally faster and less expensive than court litigation, and Bakhtiari & Harrison manages the complete process — from reviewing trading records and commission reports through the arbitration hearing.

Signs of Churning in Your Brokerage Account

• An unusually high number of trades relative to your account size and stated investment strategy, especially buy-and-sell pairs executed in short succession
• Commissions and fees that consistently outweigh gains, or that seem disproportionate to the size of the account
• Trades you don’t recall discussing, or that don’t match the investment objectives and risk tolerance you gave your broker or financial advisor
• Your broker is discouraging a buy-and-hold approach in favor of frequent switching between securities
• A fee-based account with little to no trading activity or ongoing advice — a possible sign of reverse churning

Frequently asked questions — Churning and Excessive Trading

Contact a Churning Attorney — Free Consultation

Contact Bakhtiari & Harrison for a free, confidential evaluation of your churning or excessive trading claim. Our FINRA attorneys evaluate every potential investor claim at no charge. Investor cases are handled on a contingency fee basis — no recovery, no fee.

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