National Securities Corporation

National Securities Corporation Review Summary

If you are in the market for a good financial advisor or firm, then avoid National Securities Corporation at all costs. Previous clients have reported and complained about serious financial damages and/or fraud. National Securities Corporation is also under FINRA’s radar. Previously FINRA has uncovered well-reputed firms and advisors to be guilty of shocking crimes, which include but are not limited to:

  • Misrepresentation
  • Fraud
  • Scam
  • Siphoning Of Client’s Funds
  • Embezzlement
  • Dereliction of Duty

Nefarious Background Of National Securities Corporation (CRD No. 7569)

National Securities has been a FINRA member since 1947. The firm is headquartered in
Boca Raton, Florida and conducts a general securities business. National Securities has
approximately 660 registered representatives and 130 branch offices.

  • On December 4, 2014, FINRA accepted an AWC in which National Securities was censured and fined $35,000 for failing to timely file amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5), failing to comply with filing requirements for reporting statistical and summary information regarding complaints and settlements, and failing to enforce its written supervisory procedures for compliance with these obligations.
  • On February 1, 2011, FINRA accepted an Offer of Settlement in which National
    Securities was censured and fined $22,500 for failing to file amendments to Forms
    2U4, failing to timely file and filing inaccurate amendments to Forms U4 and U5, and
    failing to comply with filing requirements for reporting statistical and summary
    information regarding complaints.
  • On December 17, 2002, FINRA’s predecessor NASD accepted an AWC in which
    National Securities was censured and fined $32,500 for, among other things, failing
    to file amendments to Forms U4 and U5 and failing to supervise its timely reporting
    of customer complaints and settlements on Forms U4 and U5.

Criminal Activity(s) Reported – National Securities Corporation

National Securities failed to comply with its Form U4 and U5 reporting obligations.

Pursuant to Article V, Section 2 of FINRA’s By-Laws, when any person applies to be
registered with FINRA, the member firm must file a Form U4 containing certain
disclosures, such as customer complaints and unsatisfied judgments involving the person.
Article V, Section 2(c) of FINRA’s By-Laws requires that member firms keep every
Form U4 filed with FINRA current at all times by filing amendments no later than 30
days after learning of facts giving rise to the amendment. Article V, Section 3 of
FINRA’s By-Laws requires each member firm, not later than 30 days after termination of
the association of any person, to give notice to FINRA of such termination by filing a
Form U5. If a member firm learns of facts causing any information in a Form U5 to become inaccurate or incomplete, Article V, Section 3(b) of FINRA’s By-Laws requires
the firm to file an amendment no later than 30 days after learning of the facts giving rise
to the amendment. FINRA Rule 1122 also prohibits member firms from filing with
FINRA information with respect to registration that is incomplete or inaccurate so as to
be misleading or could in any way tend to mislead and requires member firms to correct
any such filings.

Between May 2015 and November 2018, National Securities filed four late amendments
to Forms U4 and eight late amendments to Forms U5 relating to reportable customer
complaints and an unsatisfied judgment. The firm knew about each of these events but
was between one month and two years late in disclosing them, with an average delay of
more than 13 months, and often did not disclose them until after FINRA inquiry. The
firm also failed to file five Form U4 amendments relating to reportable customer
complaints during this period.

By failing to timely file Forms U4 and Forms U5 and failing to file Forms U4, National
Securities violated Article V, Sections 2 and 3 of FINRA’s By-Laws and FINRA Rules
1122 and 2010.

National Securities failed to comply with its FINRA Rule 4530 reporting obligations.

FINRA Rule 4530(a) requires each member firm to “promptly report to FINRA, but in
any event not later than 30 calendar days, after the member knows or should have known
of the existence of” certain events. For example, a firm must report if it or one of its
associated persons “is the subject of any claim for damages by a customer . . . that relates
to the provision of financial services or relates to a financial transaction, and such . . .
claim for damages has been disposed of by . . . settlement for an amount exceeding
$15,000.” FINRA Rule 4530(d) requires each member firm to “report to FINRA
statistical and summary information regarding written customer complaints . . . by the
15th day of the month following the calendar quarter in which customer complaints are
received by the member.”

Between May 2015 and November 2018, National Securities failed to comply with its
reporting obligations under FINRA Rule 4530. The firm reported a $30,000 settlement of
a customer’s claim for damages against one of its associated persons for sales practice
violations a year late. The firm also failed to report, or failed to report timely, statistical
and summary information to FINRA regarding 19 written customer complaints. In
addition, the firm submitted 34 inaccurate or incomplete filings required by FINRA Rule
4530(d).

By failing to comply with its reporting obligations, National Securities violated FINRA
Rules 4530(a) and (d) and 2010.

National Securities failed to enforce written supervisory procedures relating to its
reporting obligations.

FINRA Rule 3110(b) requires each member firm to establish, maintain, and enforce
written procedures to supervise the types of business in which it engages and to supervise
the activities of registered representatives, registered principals, and other associated
persons that are reasonably designed to achieve compliance with applicable securities
laws, regulations and rules of FINRA.

Between May 2015 and November 2018, National Securities had written procedures in
place regarding the firm’s obligations to collect and report information to FINRA on
Forms U4 and U5 and as required by FINRA Rule 4530. However, National Securities
failed to enforce these procedures to ensure the timely and accurate filing of required
information. The failure to enforce the firm’s procedures occurred for various reasons. In
some instances, firm personnel failed to identify the communication at issue as a
complaint or incorrectly determined that a customer complaint was not a reportable
event. In other instances, firm personnel failed to timely review and process customer
complaints in accordance with firm procedures. On certain other occasions, the firm’s
registration group entered the wrong problem code or failed to identify the subject
security in a FINRA Rule 4530 filing.

By failing to enforce these procedures to ensure the timely and accurate filing of required
information, National Securities violated FINRA Rules 3110(b) and 2010.

National Securities failed to establish, maintain, and enforce written supervisory
procedures relating to contingency offerings.

From July 2015 through March 2017, National Securities derived nearly 25 percent of its
revenue from underwriting activity and participated in at least 20 contingency offerings.
Although the firm maintained written supervisory procedures addressing contingency
offerings under Exchange Act Section 10(b) and Rule 10b-9, these written procedures
were limited in that they only covered escrow requirements and the return of funds where
a contingency was not met by the closing date. The firm’s written procedures failed to
address circumstances involving material changes to an offering such as the extension of
an offering, a change in the contingency amount, or a change in the structure. The written
procedures also were silent on non bona-fide sales, which are prohibited by the Rule
absent required disclosures. National Securities revised its written procedures in March
2017.

By failing to establish, maintain, and enforce written procedures reasonably designed to
achieve compliance with Exchange Act Section 10(b) and Rule 10b-9, National
Securities violated FINRA Rules 3110(b) and 2010.

Penalty For The Terrible Crimes

  • A censure; and
  • A fine of $125,000.

Respondent agrees to pay the monetary sanction upon notice that this AWC has been
accepted and that such payment is due and payable. Respondent has submitted an
Election of Payment form showing the method by which it proposes to pay the fine
imposed.

Respondent specifically and voluntarily waives any right to claim an inability to pay, now
or at any time hereafter, the monetary sanction imposed in this matter.

Recent Illegal Activity(s)Of The Individual/Firm

Between May 2015 and November 2018, National Securities filed four late Form U4
amendments, filed eight late Form U5 amendments, and failed to file five Form U4
amendments. During this period, National Securities also failed to report or reported late
statistical and summary information for 19 written customer complaints, reported late a
$30,000 settlement of a customer’s claim against one of its associated persons for sales
practice violations, and submitted 34 inaccurate or incomplete filings required by FINRA
Rule 4530(d). The firm also failed to enforce its written supervisory procedures designed
to achieve compliance with reporting requirements for Form U4 and U5 amendments and
FINRA Rule 4530 filings. By virtue of this misconduct, National Securities violated
Article V, Sections 2 and 3 of FINRA’s By-Laws and FINRA Rules 1122, 3110, 4530
and 2010.

In addition, from July 2015 through March 2017, National Securities failed to establish,
maintain, and enforce written supervisory procedures reasonably designed to achieve
compliance with Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-9
thereunder regarding contingency offerings. During this period, National Securities
participated as a placement agent in more than 20 contingency offerings. By virtue of this
misconduct, National Securities violated FINRA Rules 3110 and 2010.

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