Churning involves selling stocks inside an investor’s account just to earn commissions for the broker. The selling may be formally authorized or not. If the purpose is to generate a fee, this can be established by looking at the numbers — rates of return, turnover (sales) rates, purchases, and the like. If the broker exercised control over the account in a reckless manner and the trading was excessive, he or she may have acted against the client’s best interest. That’s churning, and the broker and his employer may be liable for the losses.
