Churning of a brokerage account occurs when a broker who exercises control over the trading engages in an excessive number of transactions in order to generate commissions. While a churning claim is a challenge to the quantity of transactions, a suitability claim challenges the quality of the investments recommended by the broker. E.g., Brown v.
Unauthorized trading is the execution of transactions without the customer s prior consent.
This is commonly pled as a breach of contract. Express control exists where the customer has a discretionary account established pursuant to a written agreement in which the customer has given the broker discretion to trade the account without consulting the customer in advance regarding each transaction. The vast majority of retail brokerage accounts are nondiscretionary. Whether the broker has implied or de facto control over the account is determined by a number of factors related to the sophistication of the customer. The touchstone is whether or not the customer has sufficient intelligence and understanding to evaluate the broker s recommendations and to reject one when he thinks it unsuitable . . .