The SEC Obtains Final Judgment Against Former Worden Capital Management Broker, Donald Fowler, For Excessive Trading And Churning In Customer Accounts
Donald Fowler (CRD # 4989632) was a Financial Advisor at Worden Capital Management in Rockville Center, New York. Donald Fowler has been in the securities industry since 2005 and previously worked for JD Nicholas & Associates and American Capital Partners.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on February 28, 2020, the SEC obtained a final judgment against Donald for churning and excessive trading. The final judgment entered by the United States District Court for the Southern District of New York provided:
“Donald J. Fowler misused his position as a broker to recommend a series of investments that were unsuitable to any investor. He implemented trades in his customers’ accounts without their consent. His customers lost thousands, while Mr. Fowler profited from the substantial commissions that his trades generated. A jury unanimously found Mr. Fowler liable with respect to the charges mounted against him by the Securities and Exchange Commission in this case. Because the Court finds that there is a substantial likelihood that Mr. Fowler will again violate the securities laws, the Court will enter a permanent injunction to protect the public from future violations by Mr. Fowler. The Court also orders Mr. Fowler to disgorge his ill-gotten gains, and to pay Tier III penalties for each of his violations.”
This judgment was the culmination of a multi-year investigation and criminal prosecution.
For a copy of the SEC’s Final Judgment, click https://www.sec.gov/litigation/litreleases/2020/order24756.pdf
In addition, Donald Fowler has fourteen (14) customer complaint disclosures reflected on his CRD, alleging sales practice misconduct. Among the customer complaints against Donald Fowler include the following:
• October 2019—”Breach of fiduciary duty; negligence; negligent supervision; fraud; breach of contract; violation of GA Uniform Securities Act. Dates of alleged activity: March 2015 through January 2018.” Alleged damages are $100,000 and the matter remains pending.
• August 2019—”Fraud, negligent misrepresentation, breach of fiduciary duty and breach of the covenants of good faith and fair dealing, negligent supervision, breach of conduct, Section 20 violations, respondeat superior.” The matter was settled for $7500.
• July 2019—”Negligence, unsuitability, breach of fiduciary duty, breach of contract, negligent misrepresentation and omissions.” Alleged damages are $29,036 and the matter remains pending.
• June 2016—”Violation of Sections l0(b) and 20(a) of the Securities Exchange Act of 1934, Churning or Excessive Activity, Unauthorized Trading, Breach of Fiduciary Duty, Negligent Failure to Supervise, Common Law Fraud. Allegation period: 12/02/2014 to 05/05/2016.” The matter was settled for $400,000.
• April 2015—”CHURNING, UNSUITABILITY, NEGLIGENT SUPERVISION, MARKUP OR COMMISSION ABUSE, BREACH OF FIDUCIARY DUTY.” The matter was settled for $90,000.
• March 2015—”CLAIMANT HAS BEEN INJURED GREATLY AS A RESULT OF RESPONDENT’S (J.D. NICHOLAS & ASSOCIATES, INC.) BREACH OF FIDUCIARY DUTY, NEGLIGENCE, VIOLATIONS OF THE OHIO SECURITIES ACT, AND BREACH OF CONTRACT. THE DATES RELATED TO THE ALLEGATIONS ARE APPROXIMATELY JANUARY 2014 TO APRIL 2014.” The matter was settled for $24,000.
• January 2015—”CLIENT ASSETS WERE INVESTED IN HIGHLY SPECULATIVE AND RISKY INVESTMENTS THAT WERE WHOLLY UNSUITABLE TO HIS INVESTMENT OBJECTIVES AND RISK-TOLERANCE.” The matter was settled for $50,000.
• October 2014—”ALLEGED CLAIMS INVOLVE CHURNING, NEGLIGENCE, UNSUITABILITY, OVERCONCENTRATION, AND FAILURE TO SUPERVISE.” The matter was settled for $350,000.
For a copy of Donald Fowler’s CRD, click https://brokercheck.finra.org/individual/summary/4989632#disclosuresSection
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses. Part of the suitability analysis requires that the trades are quantitatively suitable, meaning that the broker cannot execute excessive trades or engage in churning.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at email@example.com.
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