When we worked on Wall Street, churning was called the silent killer. It does not require a market crash. It does not need a Ponzi scheme. A broker simply buys and sells securities in a customer’s account to generate commissions. The investor sees statements with activity. The account balance, however, bleeds out one trade at a time. FINRA issued new disciplinary actions in May 2026 that remind us this old abuse is still alive.
What FINRA alleged in its May 2026 actions
In the May 2026 disciplinary report, FINRA named multiple brokers for willful violations of Section 10(b) of the Exchange Act and Rule 10b-5. The allegations include churning customer accounts and engaging in a scheme to defraud. Brokers allegedly sold private placement shares to retail clients and then misled those clients about their ability to resell the stock. When the customers later discovered the shares were restricted, much of the damage was already done.
The schemes typically work like this. A broker identifies an investor who wants yield and is willing to consider non-public investments. The broker sells restricted shares at a markup. The shares cannot legally trade on the open market for a holding period. The broker assures the client that a resale market exists. It does not. The client is stuck with illiquid shares while the broker collects a generous commission.
Why churning still happens in 2026
Technology and regulation have reduced the most obvious forms of churning. Trade surveillance at major firms catches excessive activity faster than it did two decades ago. But smaller independent broker-dealers and those focused on alternative products still offer cover. Brokers who push private placements, variable annuities, and non-traded REITs can mask churning inside complex product recommendations. The trades look strategic instead of abusive. They are not.
FINRA’s May actions show that enforcement remains active. The regulator reviews account data, customer complaints, and correspondence to build these cases. Disciplinary actions can include fines, suspensions, and permanent bars. For investors, the key question is whether their own accounts show warning signs.
How to spot churning in your own brokerage account
Look at the turnover ratio. If the total dollar value of purchases in your account exceeds the account value multiple times in a year, that is a red flag. Also examine whether the trades served a clear investment purpose. Did the broker explain why he sold one fund to buy another nearly identical fund? Did the new position match your stated risk tolerance? If the answers are vague, you may be dealing with churning.
Another indicator is concentration in complex products. Private placements, non-traded REITs, and certain variable annuity contracts pay the highest commissions. A broker who pushes these repeatedly may be motivated by fees rather than your financial welfare. Regulatory suitability rules require that recommendations match the client’s age, income, and investment objectives. Too often, they do not.
Haselkorn & Thibaut fights for investor recovery
For investors who suffered losses from churning, unsuitable recommendations, or misleading private placement sales, legal recovery is possible. Haselkorn & Thibaut is a national securities law firm founded by former Wall Street defense attorneys. The firm has recovered more than $520 million for clients. Its success rate stands at 98 percent. The partners hold an AV Preeminent rating from Martindale-Hubbell, with more than 95 years of combined experience.
The firm handles cases on a contingency basis and offers free consultations. If your broker pushed excessive trades, sold illiquid investments, or ignored your stated objectives, you may have a claim under FINRA arbitration rules. The statute of limitations is six years from the activity in most cases, but evidence degrades with time. Acting promptly protects your rights.
Contact Haselkorn & Thibaut today
Call 1-888-885-7162 or visit htattorneys.com to speak with a securities attorney. A short consultation can help you understand whether your losses resulted from misconduct and what recovery options exist.
Disclaimer: The content provided here is for informational purposes only and does not constitute legal advice. Every investor’s situation is unique, and you should consult with a qualified securities attorney regarding your specific circumstances.
