- July 8, 2022
- National Securities Corp.
National Securities Corporation or NSC (CRD No. 7569) was sanctioned by FINRA after allegations of unsuitability, fraud, and investment loss. The company has been a member of FINRA for 75 years and is based in Boca Raton, Florida. It has more than 115 branch offices through which it operates as a general securities business through the work of more than 550 registered representatives.
In April 2022, FINRA censured NSC, levied a $3.6 million fine, and ordered it to pay $4.77 million in disgorgement and pay restitution of $625,480 for, among other things, unlawful sales practices in connection with the sale of GPB Capital Holdings. FINRA also fined NSC for alleged market manipulation regarding securities offerings, other than GPB.
Details of the Allegations
Between April 2018 and July 2018, NSC negligently omitted to tell investors in two offerings related to GPB Capital Holdings, LLC (GPB Capital) that the issuers failed to timely make required filings with the Securities and Exchange Commission (SEC), including filing audited financial statements. These were deemed material omissions.
In October 2019, NSC acted as a lead underwriter of a public offering, and in connection with that offering received common stock warrants. Although NSC represented to FINRA that certain of these warrants would not be sold for a period of 360 days, NSC permitted certain warrants to be sold within the 360-day period.
Between September 2013 and May 2017, NSC failed to reasonably supervise one of its registered representatives (Representative A) by failing to reasonably respond to red flags that he was causing NSC to record false and significant increases in the value of customer assets, as well as false suitability information on record with the firm, in order to avoid the firm’s limits on concentration levels of his non-traded real estate investment trust (REIT) recommendations and to make his non-traded REIT recommendations appear to be suitable.
Between January 2005 and April 2020, Respondent failed to obtain locates in connection with at least 33,241 short sale transactions. The firm further failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with established rules and regulations.
Why Suitability and REITs Are a Concern for Investors & What You Can Do
GPB Capital Holdings LLC started in 2013, buying auto dealerships. It reportedly has raised money from approximately 4,000 investors. The GPB Automotive Portfolio reportedly raised $622 million, with a minimum investment of $100,000, and GPB Holdings II reportedly raised approximately $650 million. GPB Capital Holdings reportedly has raised a total of $1.5 billion.
GPB turned out to be a Ponzi scheme and the more than 60 brokerages that sold GPB have been facing an onslaught of litigation for their failed due diligence practices. The Wolper Law Firm, P.A. has been on the front-end of these efforts.
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.
The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., 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 firstname.lastname@example.org.