Churning is a practice in the financial and investment sector where a broker excessively buys and sells securities in a clientís account primarily to generate higher commissions rather than to benefit the investor. This unethical activity can erode portfolio value and increase transaction costs without corresponding investment gains. Understanding churning is crucial for investors to protect their interests and ensure transparent dealings in the market.

Churning is often identified by unusually high trading volume compared to the size of the clientís portfolio. It may involve frequent buying and selling of stocks, mutual funds, or other securities, even when such trades do not align with the investorís objectives or market conditions. While some trading activity is legitimate, churning is characterized by trades motivated solely by earning commissions.

Investors can safeguard themselves against churning by monitoring account statements, tracking portfolio turnover, and verifying that trades align with their investment strategy. SEBI regulations in India strictly prohibit such unethical practices. Brokers are required to act in the best interests of their clients, and violations can lead to penalties, suspension, or legal action.

Recognizing churning is essential for investor protection and market integrity. Awareness of trading patterns, brokerage fees, and transaction history allows investors to identify suspicious activity and take corrective measures promptly. SEBIís investor education initiatives and grievance redressal mechanisms further help safeguard against such malpractices.

In summary, churning is the excessive trading of securities in a client account for earning higher commissions, rather than benefiting the investor. Understanding its signs, risks, and regulatory framework helps investors protect their portfolios, ensure fair practices, and participate confidently in SEBI-regulated financial markets.