National Securities Corporation a securities broker dealer headquartered in Boca Raton Florida has been censured and fined $125,000.00 by Financial Industry Regulatory Authority (FINRA) based upon findings that it did not timely report customer complaints and failed to supervise contingency offerings. Letter of Acceptance Waiver and Consent No. 2017053208002 (Oct. 27, 2020).
According to the AWC, from May of 2015 to November of 2018, four amendments to Forms U4 and eight amendments to Forms U5 had been filed late by National Securities Corporation. These disclosures related in part to customer disputes involving the securities broker dealer or its stockbrokers. National Securities Corporation knew about those events but did not disclose them until after it was probed by the regulator. FINRA found that National Securities Corporation violated FINRA Rules 2010, 1122 and Article V Sections 2 and 3 of FINRA’s By-Laws for this reason.
The AWC stated that from May of 2015 to November of 2018, the securities broker dealer was also not compliant with Rule 4530 in regard to its reporting of the settlement of a customer initiated investment related claim. A $30,000.00 settlement was reported by National Securities Corporation one year late according to the regulator. There was also no timely reporting of information to FINRA in regard to 19 customer initiated investment related complaints.
FINRA also noted 34 occasions where National Securities Corporation’s files relating to customer disputes were incomplete or inaccurate. The securities broker dealer was mandated under FINRA Rule 4530(a) to make disclosures to FINRA within 30 days after learning of a stockbroker being subject of a customer initiated investment related dispute involving allegations of sales practice violations relating to financial services or financial transactions if the dispute was resolved for more than $15,000.00. FINRA found that National Securities Corporation violated FINRA Rules 2010 and 4530(a) and (d).
FINRA confirmed that between May of 2015 and November of 2018, National Securities Corporation failed to supervise the reporting of customer disputes. The AWC stated that some of the securities broker dealer’s failures came from personnel choosing not to identify communications which constituted customer complaints. They improperly decided that a customer complaint was not reportable. The AWC stated that supervisory personnel also failed to review and process customer complaints timely or in accordance with its own procedures. FINRA determined that National Securities Corporation violated FINRA Rules 2010 and 3110(b) in this regard.
The regulator also mentioned that between July of 2015 and March of 2017, approximately one-fourth of the revenue National Securities Corporation generated came by way of contingency offerings where it provided underwriting services. The AWC indicated that the securities broker dealer did not have sufficient supervisory protocols for what should happen if there was a significant change in the offering including circumstances in which the contingency amount changed or its structure changed. FINRA determined that National Securities Corporation neglected to maintain adequate supervisory rules during the time that it participated in 20 offerings, violating FINRA Rules 2010 and 3110(b).
This is not the first time that National Securities Corporation has been fined and censured for underreporting. Between 2002 and 2014, there have been three instances where the securities broker dealer was fined and censured for failing to amend Forms U4 or U5 to reflect important information about customer complaints or settlements.
