Securities Lawyers Blog
The securities attorneys at Gana Weinstein LLP are investigating claims against Wunderlich Securities, Inc. (Wunderlich Securities) broker Derrick Watts (Watts). According to BrokerCheck records, Watts has been subject to a regulatory matter in which the Financial Industry Regulatory Authority (FINRA) sanctioned Watts for various violations of the securities laws including churning, otherwise known as excessive trading. In March 2016, FINRA found that Watts failed to report his involvement in four unsatisfied civil judgments from 2009 to 2013 on his U4 registration form. Without admitting or denying the findings, Watts consented to the sanctions and the entry of findings. In April 2016, Watts was suspended for three months.
In addition to the FINRA sanctions, Watts has been subject to three customer complaints and two financial disclosures – including filing for bankruptcy and a tax lien.
In February 2016, Watts was discharged for bankruptcy due to failure in a real estate development that he was involved in. Bankruptcies and large tax liens are a potential sign that the advisor has difficulty managing their own finances. FINRA provides this information to the public because it is material for consumers to know whether or not their advisor’s financial situation influences the advisor’s recommendations.
Most recently, in September 2017, a customer alleged that from January 2010 to November 2015, Watts had been excessively trading the customer’s account without customer knowledge or approval.
In February 2016, a customer alleged that from January 2010 to November 2015, Watts was churning a customer’s account without customer knowledge or approval. The client requested $32,914.56 for damages.
All registrations filed with FINRA must be reported in a truthful and timely manner. Filing incomplete, inaccurate, or misleading information is not consistent with FINRA’s high standards of honor and equitable principles of trade (FINRA rule 2010). Failure to do so can also hinder brokerage firms duty to supervise, or duty to monitor a broker’s investment recommendations, outside business activities, and representations of investors among other obligations.
Churning is considered a species of securities fraud which can occur through excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. Similarly, excessive trading involves the first two elements under FINRA’s suitability rule, but not the third element. Certain ratios are used to calculate the extent of churning and excessive trading of an account. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.
Watts has been in the securities industry for 24 years and has been registered with Wunderlich Securities since 2016. Previous registrations include Oppenheimer & Co. Inc., Morgan Stanley & Co. Incorporated, Morgan Stanley DW Inc., and Merill Lynch, Pierce, Fenner & Smith Incorporated.
Investors who have suffered losses may be able recover their losses through securities arbitration. The investment attorneys at Gana Weinstein LLP are experienced in representing investors in cases of selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.