Cetera Fined $1.4M For Churning Broker

You may have heard the term “churning” in discussions of investments and securities. But you probably won’t know what it means unless you’ve actually experienced it. (Hint: it has nothing to do with butter.)

“Churning” is when a broker and/or firm conducted extra trading in your account for the sole purpose of earning additional commissions from the transactions. If you’ve ever looked at an account statement and thought, “that’s quite a lot of broker commissions,” it could mean that your account has been churned.

Cetera Advisor Networks will be paying about $1.4 million in fines and restitution related to a former broker who made multiple short-term mutual fund purchases. The broker received sales awards in 2013 and 2014 from the firm. FINRA fined Cetera $700,000, and ordered the firm to pay $691,800 in customer restitution.

The unidentified broker made hundreds of short-term purchases sales of A-share mutual funds in the accounts of 14 customers. They were charged new front-end commissions with each trade, which enriched the broker and the firm. However, many his customers were seniors, and they lost nearly $700,000 in the six years of churning.

The broker attempted to hide the churning by alternating between mutual-fund churning through stock trading between mutual fund sales and purchases. This broker was barred by FINRA in 2017 for failing to cooperate with FINRA in an investigation into his conduct and practices.

Cetera Advisor Networks also failed to supervise the broker and respond to red flags from 2009 through 2015, even after his supervisors flagged the excessive trading to headquarters.  The firm finally took action after FINRA began an investigation from an “outside tip.” Cetera eventually signed an Acceptance, Waiver & Consent (AWC) letter, but neither admitted nor denied any of the claims.

Silver Law Group represents investors in securities and investment fraud cases. Our lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to stockbroker misconduct. If you have any questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases are handled on a contingent fee basis, meaning that you won’t owe us until we recover your money for you. Contact us today and let us know how we can help.