Hilltop Securities Review: Regulatory History, Broker Misconduct

Hilltop Securities Review: Regulatory History, Fines, Broker Misconduct & Investor Claims

The White Law Group reviews the regulatory history and investor complaints involving Hilltop Securities Inc.

Hilltop Securities Inc. (CRD#: 6220) is a Dallas-based independent broker-dealer and registered investment adviser. Formed through the 2016 merger of First Southwest Company, LLC and Southwest Securities, Inc., Hilltop became a subsidiary of Hilltop Holdings, Inc. following the 2015 acquisition of SWS Group, Inc.

The firm has been registered with the Financial Industry Regulatory Authority (FINRA) since 1992 and currently has 78 disclosure events listed on its BrokerCheck report, including 56 regulatory actions and 22 arbitration claims.

Regulatory Actions and Fines Involving Hilltop Securities

FINRA and the Securities and Exchange Commission (SEC) have both sanctioned Hilltop Securities for a range of compliance failures, including AML issues, unsuitable investment recommendations, and municipal bond misconduct.

July 2020 – $475,000 Fine for AML Failures

FINRA fined Hilltop Securities $475,000 for allegedly failing to implement an anti-money laundering (AML) program capable of detecting suspicious trading in low-priced securities. According to the regulator, over 2.07 billion shares worth approximately $221 million were not reviewed for red flags.

September 2019 – Margin Disclosure Violations

Hilltop was censured and fined $250,000 for failing to provide margin interest rate disclosures to customers. The firm also lacked a supervisory system to ensure compliance with FINRA disclosure requirements.

June 2017 – Inadequate Supervision of Unsuitable Investments

From 2012 to 2014, Hilltop allegedly failed to supervise a registered representative’s unsuitable investment recommendations. FINRA issued a $40,000 fine, plus restitution, and suspended the rep involved.

Repeated MSRB Violations

Hilltop (and its predecessor firms) has faced multiple Municipal Securities Rulemaking Board (MSRB) violations. The firm was sanctioned in 2011, 2013, and 2016 for failures related to the municipal securities market.

SEC Sanctions Against Hilltop Securities

August 2024 – $1.6 Million Civil Penalty for Recordkeeping Violations

The SEC fined Hilltop $1.6 million for failing to preserve business communications, including messages on personal devices from firm executives. The violations spanned from 2019 to 2024. The firm self-reported and agreed to hire an independent compliance consultant.

July 2021 – Municipal Bond Misconduct

Hilltop and a municipal trader, Daniel Tracy, were sanctioned for improperly obtaining retail priority allocations in new municipal bond offerings. The firm agreed to pay a total of $340,193, including disgorgement and penalties.

September 2019 – Share Class Disclosure Violations

As part of the SEC’s Share Class Selection Disclosure Initiative, Hilltop was censured for failing to disclose conflicts of interest in mutual fund share class recommendations.

Broker Misconduct and Customer Complaints Involving Hilltop Securities

Broker-dealers like Hilltop Securities have a duty to supervise their advisors and ensure that clients are protected from fraud and negligence. Hilltop has employed several brokers who have faced serious allegations of misconduct.

July 2025 – Rajesh Markan Pleads Guilty to $2.9M Fraud

Former Hilltop Securities advisor Rajesh Markan was barred by FINRA and the SEC, and pleaded guilty to wire fraud in a $2.9 million Ponzi-style scheme. From 2022 to 2024, during his time at Hilltop, Markan solicited clients to invest in a fake private equity fund, misappropriated funds, and fabricated documents. Hilltop filed a Form U5 noting internal review for fraud. He was barred by FINRA in October 2024 and pleaded guilty in June 2025.

July 2019 – Broker Richard Cagle Barred

Richard Cagle was barred by FINRA following allegations of unsuitable investment recommendations and mismarked order tickets while at Hilltop’s Corpus Christi branch.

September 2019 – Dallas Broker Barred for Fraudulent Statements

A Dallas-based Hilltop advisor was barred after allegedly creating false account statements used to secure a $1.872 million loan. The broker received $50,000 in exchange for the deception, which caused over $3.2 million in losses to a bank.

March 2016 – David Lockey Barred

Former Hilltop broker David Lockey was barred by FINRA for unsuitable short-term trading of mutual funds and unit investment trusts. He also allegedly falsified documents to misrepresent holding periods.

FINRA Arbitration & Investor Recovery Options

When a broker or firm like Hilltop Securities is accused of negligence, fraud, or failure to supervise, investors may be entitled to recover losses through FINRA arbitration. The FINRA Dispute Resolution Forum is the primary venue for investor claims against broker-dealers and financial advisors.

Securities Attorneys for Hilltop Securities Investor Claims

The White Law Group represents investors nationwide in claims against financial professionals and firms like Hilltop Securities. If you have suffered investment losses due to broker fraud, misrepresentation, or unsuitable recommendations, we can help you evaluate your claim and pursue recovery through FINRA arbitration.

To schedule a free consultation, contact us at 888-637-5510 or visit www.whitesecuritieslaw.com.

Frequently Asked Questions (FAQs)

1. What are common types of broker misconduct at firms like Hilltop Securities?
Common misconduct includes making unsuitable investment recommendations, misrepresenting investments, unauthorized trading, and failure to disclose conflicts of interest.

2. How can I recover investment losses from Hilltop Securities?
You may be able to file a FINRA arbitration claim if your losses were due to fraud, negligence, or failure to supervise. An experienced securities attorney can guide you through the process.

3. What happens when a broker-dealer is fined or sanctioned by FINRA or the SEC?
Sanctions may include fines, censures, restitution, or suspension. Regulatory actions also impact a firm’s reputation and can strengthen investor claims in arbitration.