Many minor crimes are very obvious, such as when someone holds up a gas station or a bank. But white-collar crimes, and many financial crimes in general, tend to be a lot more complex. Exactly what happened may not be nearly as clear, and it’s very important to sort through the details when facing allegations.
One way that this could happen is if a person works as an investment broker and they are accused of churning. This can be viewed as a type of fraud committed against that person‘s clients. But what is churning, how does it happen and why is it a white-collar crime?
Trading shares for the commission
An investment broker is supposed to buy and sell shares on behalf of their clients. In theory, they simply understand the market and can cause the value of the accounts to grow by buying and selling at the right time.
However, some investment brokers are paid for every transaction they make. They get a percentage of the sale or a flat fee. This means they have an incentive to make trades that are not necessary or to make far more trades than needed. A broker who is constantly buying and selling shares just to get those commissions is engaging in churning.
This is a white-collar crime because it is unethical for the clients. They may not understand how the market works, but it’s clear that the broker is only thinking about their own best interests and not doing what would actually be best with their clients’ money.
Of course, the financial records to demonstrate that this occurred and that it was fraudulent activity can be quite complicated. Those who are facing these allegations must know about all of their defense options.
