What is Churning?
Churning occurs when a broker engages in excessive trading of securities in a customer’s account with the primary purpose of generating commissions. FINRA Rule 21111 requires that a broker-dealer or associated person who has actual or de facto control over a customer account to have a reasonable basis for believing that a series of recommended transactions, even if suitable on their own, are not excessive or unsuitable for the customer taken together.
Churning typically does not generate additional income for the investor, while generating extra commissions for the broker. Additionally,
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