Define: Churning

UK Accounting Glossary

Definition: Churning


Quick Summary of Churning


In sales, the practice of getting consumers to purchase more than they need to, or unnecessary sales made solely to generate income. Can also refer to the general turnover in a client base.



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Full Definition of Churning


Churning means excessive buying and selling in a client’s account by a broker for the primary purpose of generating commissions rather than furthering the customer’s investment goals. The major securities industry self-regulatory organizations (SROs) have rules that prohibit churning. Churning violates the NASD Fair Practice Rules. While churning is illegal, it is often difficult to prove. An attorney can analyze a broker’s records to determine if churning has occurred. To establish that churning has taken place, the attorney must show that the pattern of trading activity in the account was excessive in size or frequency, given the financial resources and character of a customer’s account. Most churning occurs when a broker has the discretion to trade the account. Most churning involves trades of individual securities, but the SEC also discourages trading of mutual funds on a short-term basis.


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Examples of Churning in a sentence


Although they’re cheaper, none of that company’s products are designed to last more than six months, and this product churning means that customers don’t get a good deal after all.
The two brokers made millions of dollars through their habit of churning sales to each other so that they could continue to collect commissions.



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Churning. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. February 24, 2020 https://payrollheaven.com/define/churning/.
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Churning. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/churning/ (accessed: February 24, 2020).
American Psychological Association (APA):
Churning. PayrollHeaven.com. Retrieved February 24, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/churning/

Definition Sources


Definitions for Churning are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th February 2020.