Churning Law and Legal Definition

Churning is an unethical and often illegal practice by which a broker conducts excessive trading in a stock investment account in order to generate commissions, contrary to the best interests of the customer. Brokers may be tempted to churn accounts because their income is directly related to the volume of trading undertaken by customers. Suspected churning should be reported to the brokerage firm's office manager. Churn may also be used generally to refer to a turnover rate.