SEC Disciplinary Action for Churning

In two related enforcement actions, the SEC charged three former brokers at an Atlanta-based brokerage firm for "churning" the accounts of customers with conservative investment objectives, causing severe investor losses while the brokers collected excessive commissions, fees, and margin interest. The SEC also sanctioned the firm itself and its President for failure to supervise.

The turnover ratios at issue were from 8x to 13 times annually. In footnote 2 of the Turner disciplinary action, the SEC indicates that a turnover ratio of 6 times can reflect excessive trading.

Lofchie Comment: The Turner disciplinary action provides a fairly good overview of the procedures that were in place at the firm with respect to excessive trading and useful guidance as to how those procedures should have been improved.

See: SEC Order in the Matter of Bresner, Calabro, Konner, and Koutsoubos; SEC Order in the Matter of JP Turner Company and William L. Mello; SEC Press Release.