Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Woodstock Financial Group, Inc. (Woodstock Financial) broker Joseph Derrico (Derrico) has been subject to two disclosed customer complaints, one regulatory complaint, and one criminal matter. The regulatory action filed by the State of Montana alleges that a customer filled out an online complaint with the state making allegations concerning Derrico. Montana filed a complaint against the broker concerning unauthorized trading; excessive trading; using discretion without written discretionary authority; fraud – these allegations are associated with claims of churning or excessive trading. The regulatory complaint is still pending.
When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. 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.
The number of complaints against Derrico are unusual compared to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.
Derrico entered the securities industry in 2004. From June 2012 until November 2014 Derrico was registered with International Assets Advisory, LLC. From October 2014 until July 2015 Derrico was associated with Alexander Capital, L.P. Finally since July 2015 Derrico has been registered with Woodstock Financial out of the firm’s Staten Island, New York office location.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due excessive trading and other securities laws violations. Our consultations are free of charge and the firm is only compensated if you recover.