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Derek Johnson Involved in $1.2 Million Unsuitability Dispute

Feb 28, 2022 Unsuitable Investments

Derek Johnson (CRD #: 2922680), a broker and investment advisor registered with Morgan Stanley, is facing an unsuitability dispute, according to his BrokerCheck record, accessed on February 15, 2022.

According to the allegations filed on December 10, 2021, Derek Johnson recommended an unsuitable investment strategy. The investor is seeking $1,242,923 一the case is still pending. 

BrokerCheck does not provide details regarding the nature of the investment strategy; however, FINRA Rule 2111 requires registered financial advisors to have a "reasonable basis" to believe that a recommended transaction or investment strategy suits their client's needs.

According to FINRA, the three prongs of a suitability determination are 1) reasonable-basis suitability, 2) customer-specific suitability, and 3) quantitative suitability.

  1. Reasonable-basis Suitability: Brokers are required to use reasonable diligence before making a recommendation. This means they have an obligation to understand an investment strategy and its potential risks and rewards.
  2. Customer-specific Suitability: Before recommending a particular security or investment strategy involving a specific client, brokers are required to have reasonable grounds for believing it will be suitable based on that client's personal profile. The profile includes information on the investor's financial goals, investing experience, and risk tolerance. 
  3. Quantitative Suitability: Brokers with control over a customer's account must have a reasonable basis to believe that the series of transactions they recommend are not excessive. Excessive transactions run the risk of incurring too many fees and negating any returns. 

If you've lost money due to a financial advisor's bad recommendations, do not hesitate to contact an experienced securities attorney as soon as possible. Kurta Law is a nationally recognized securities law firm with over 25 years of experience litigating securities fraud cases.

Background Information

Derek Johnson has passed the following exams:

  • Series 66 - Uniform Combined State Law Examination
  • SIE - Securities Industry Essentials Examination
  • Series 7 - General Securities Representative Examination
  • Series 6 - Investment Company Products/Variable Contracts Representative Examination

Derek Johnson is a registered broker in 14 states. He is also a registered investment advisor in Texas and California.

Besides Morgan Stanley, Derek Johnson has also worked with the following firms:

  • P. Morgan Securities (CRD#:79)
  • Merrill Lynch, Pierce, Fenner & Smith Incorporated (CRD#:7691)
  • Citigroup Global Markets (CRD#:7059)

Kurta Law Can Help

If you have worked with Derek Johnson and have concerns about your investments, don't hesitate to contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For nearly 20 years, Kurta Law has advocated for investors to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.