Churning
Excessive trading in a customer's account, measured against the customer's objectives and resources, done to generate commissions rather than to benefit the customer — the control + excessive-activity violation.
Expect a fact-pattern question, not a definition: the SIE hands you a scenario and asks you to name the violation. The classic “tell” is a rep trading an account that doesn’t fit the customer — a high turnover ratio, an elevated cost-to-equity (“break-even”) ratio, or commissions that dwarf any plausible gain. When the choices include suitability or unauthorized trading, the hinge is whether the volume was excessive for that customer’s stated objectives; if so, pick churning.
The classic trap is confusing churning with unauthorized trading — unauthorized is a single trade made with no authority, while churning is too many trades by someone who can drive the activity (often a rep with discretionary or de facto control). Older exam banks list control as a required element, but FINRA dropped it from the quantitative-suitability rule to match Reg BI’s care obligation, so don’t treat a formal discretionary account as mandatory. Memory hook: churning = butter the broker, not the client — turnover for the firm’s benefit.
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