Nine of the library's 25 churning records aren't churning
Of 25 records this library tags churning, 16 hold up against their primary document. Nine describe something else: three are reverse churning (NPA, Royal Alliance/SagePoint/FSC, Waddell & Reed), and six mention churning only in a bystander's background or a firm's compliance program, not the charged conduct. Two more records also carry a misattributed dollar figure.
Search this library for churning and it returns 25 case records. Read what each one’s primary document actually says, and nine of them describe something else — not because the classifier mistook another kind of misconduct for churning, but because the word “churning” appears in the document for a reason that has nothing to do with the conduct being charged.
Reverse churning is a mirror image, not churning
Three records — the Securities and Exchange Commission’s 2022 orders against NPA Asset Management and Waddell & Reed, and its 2016 order against Royal Alliance Associates, SagePoint Financial and FSC Securities — use the word “churning” exactly as often as they use the word “reverse” in front of it. All three describe accounts charged a flat, asset-based wrap fee that barely traded: Waddell’s own compliance system flagged accounts with fewer than four trades over two years, and the order finds the firm identified them and then failed to act; the Royal Alliance order describes the identical review requirement across three affiliated broker-dealers and the same failure to act on it; NPA’s order describes advisory accounts billed a management fee with “minimal, if any, trading activity.” None of the three states that any customer was traded into excessive activity. The conduct is the opposite: a fee charged for services the customer’s own inactivity meant they were not receiving. This library’s own churning technique page already names this conduct in its FAQ — “charging an asset-based fee on an account that is barely traded… the mirror image” — which makes tagging it under the same slug as the technique it mirrors a genuine inconsistency, not a judgement call.
Six more where the word is a bystander
The remaining six records use “churning” in a sentence that is not about the conduct the regulator actually charged.
Canterbury Consulting’s 2017 order charges the firm with failing to supervise a manager who favoured his own trades over clients’ — cherry-picking, a distinct technique already tracked on this site. “Churning” appears twice, both describing two unrelated customer complaints against that same manager at a prior firm, years before the conduct this order charges. Bennett Group Financial Services and Dawn Bennett’s order charges Bennett with grossly overstating the assets her firm managed to a ranking service and a radio audience; “churning” appears once, in a sentence noting that Bennett had separately been the subject of two private arbitration awards over churning, unauthorized trading and unsuitability — background on the respondent, not a finding in this proceeding. William Quigley’s order charges him with helping his brothers run a fraudulent offering scheme in which investors’ money was simply stolen; “churning” appears once, describing a different brother’s disclosure history at an unrelated firm two decades earlier. Carla Lea Chastain’s 2023 bar rests on three Arkansas state consent orders, the earliest of which, from 2005, found “suitability and churning violations” — an 18-year-old state-level finding cited as background to a bar imposed for separate, later conduct (holding herself out as licensed when she was not). American Portfolios’ and American Portfolios Advisors’ 2020 order charges the firms with letting representatives recommend an unsuitable volatility product for buy-and-hold; “churning” appears twice describing what the firm’s general exam program looked for, and the order says plainly that the exam “did not review” the product actually at issue. And the FCA’s 2018 final notice against Edward Booth — an online credit-broker fraud with no securities trading in it at all — quotes Booth himself describing the loan-broking industry as “just churning people’s information round and round,” a metaphor about paperwork, not a finding about a brokerage account.
A twenty-fifth record, the Ontario Capital Markets Tribunal’s 2016 dismissed proceeding against Paul Christopher Darrigo, is not characterised here either way: the only document cached for it is the tribunal’s own proceeding index, not its Reasons and Decision, and this piece does not assert what a document it has not read says.
The sixteen that hold up
Strip out those nine and sixteen records remain, and they show the technique working the way this library’s own churning page describes it: a turnover ratio and a cost-to-equity ratio far past the guides that courts use, a customer whose trading was concentrated in a broker’s judgment rather than their own, and losses that track the trading rather than the market.
Several of these orders state the arithmetic directly. Eli Okman’s 2014 order describes a 70-year-old Merrill Lynch retiree who had inherited the account making up most of her net worth; Okman’s trading produced a 6.1 turnover ratio and a 15.65% cost-to-equity ratio — an account that had to return 15.65% a year just to break even. Laurence Torres’s eight Alexander Capital customers saw cost-to-equity ratios between 63% and 113% and turnover ratios between 18 and 37. Alexander Capital’s own 2018 supervisory-failure order, naming three unidentified registered representatives the firm failed to supervise, states ratios “as high as 57.75 and 200.40%,” respectively — the firm’s own written procedures had defined churning as “short-term holding periods and high turnover ratios” and required supervisors to run exactly these numbers quarterly, and its order finds nobody used that information. Laidlaw and Company’s 2023 order is the most extreme in the sample: nine customer accounts before Regulation Best Interest took effect ran cost-to-equity ratios from 203% to 620% and turnover ratios from 60 to 276, meaning some accounts’ entire value was replaced by new trades roughly every week and a half over two years. A later set of accounts, recommended by different representatives after Reg BI’s care obligation applied, still ran cost-to-equity ratios of 20% to 33% and turnover of 7.9 to 16.5 — lower, but still past the guide the order itself states: a ratio above 20% or a turnover above six as indicative of excessive trading.
The customer profile that recurs, where the order says anything about it, is not sophisticated. Okman’s customer was a retiree with “little investment experience” for whom the account was the bulk of her net worth. Demitrios Hallas’s 2017 litigation release describes customers who were “unsophisticated with limited or no investing experience and modest incomes.” Neither the technique page nor this sample supports a claim that every churned customer fits that description — several of the Laidlaw and Torres customers are described only by account number — but where the primary document characterises the customer at all, in this sample it never describes a sophisticated one.
The same sweep also connects several records to one broker-dealer. Rocco Roveccio and William Gennity were both, like Torres, formerly registered representatives at Alexander Capital, L.P.; the SEC’s own release describing Torres’s 2017 result states that the agency had by then filed five separate enforcement actions against brokers for excessive and unsuitable trading, and both Roveccio’s and Gennity’s cases trace to the same examination that produced the firm’s 2018 supervisory order. One matter, told from the firm’s side and from three individual brokers’ sides, produces four of this sample’s sixteen genuine records.
Two records also carry the wrong number
Checking the money in these orders against the case files surfaced two further errors, unrelated to tagging. The 2018 record for William Gennity and Rocco Roveccio states $225,359 in disgorgement — but reading the underlying SEC release (LR-24108) shows that figure belongs to Torres, mentioned in the same release as a separate, already-settled result; Gennity and Roveccio’s own case was still an unresolved complaint at that release’s date, with no disgorgement figure stated for either of them. And both Roveccio’s and Gennity’s later 2019 judgment records omit a $160,000 civil penalty that each of their respective litigation releases states explicitly, alongside the disgorgement and interest the records do carry.
None of this changes what churning is. It changes how far a reader should trust a technique tag on sight, on this record as on any other this library holds: the tag is ours, assigned by keyword rules against a regulator’s own language, and — as the editorial policy already says — it will sometimes catch a bystander’s word rather than the conduct in front of it.