FINRA reported in July 2013 that is has filed a complaint against Abilene, Texas stockbroker James Glenn Tallant. FINRA has accused the former Morgan Stanley stockbroker of making trades in customer accounts without the customer’s written authorization and making unsuitable and excessive trades in customer accounts from early 2009 through March 2010. Short of outright stealing money from customer accounts, churning customer accounts is one of most egregious forms of stockbroker misconduct.
Churning occurs when a broker places their own interests ahead of the customer’s and makes trades for the primary purpose of generating commissions. Such broker misconduct is fraudulent and violates various state and federal securities laws, as well as FINRA industry rules. Moreover, while brokerage firms are supposed to supervise their brokers in order to protect customers from such broker fraud, the failures and breakdowns of brokerage firm supervisory systems can lead to customer abuses such as churning.
Because brokerage firm supervisory systems are not always properly structured or employed, investors should review all of their trade confirmations and account statements as soon as they arrive in the mail. Timely review of account records often can detect and put an end to stockbroker abuses. If investors identify investment losses resulting from broker misconduct, they can pursue claims to recover those losses through FINRA arbitration.