The White Law Group reviews the regulatory history of Kovack Securities Inc.
Kovack Securities, Inc. (CRD #44848, Fort Lauderdale, FL), headquartered in Fort Lauderdale, FL, is a dual registered national financial advisory firm with $101 Million in revenue in 2021. According to FINRA, the firm reportedly has 10 disclosure events on its broker record including 5 regulatory events, 5 arbitrations.
Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among others. They can have serious consequences for a broker-dealer’s profile and reputation.
Arbitrations on a broker-dealers CRD (Central Registration Depository) refer to the resolution of disputes between a broker-dealer and a client or between broker-dealers themselves through the FINRA arbitration process. When a client or another broker-dealer files a complaint against a broker-dealer, the complaint may be resolved through arbitration, which is a process where an independent third party (the arbitrator) hears both sides of the dispute and makes a binding decision.
Broker Misconduct and Customer Complaints
All broker-dealers have a responsibility to adequately supervise their employees. They must ensure the necessary procedures and systems to detect misconduct. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.
There have been several cases of registered representatives employed by Kovack Securities who were allegedly involved in broker misconduct and fraudulent activities.
February 2018 – FBI Investigation Uncovers Investment Fraud Scheme with Broker Jason Mininger
Former Kovack Securities advisor Jason E. Mininger reportedly pleaded guilty to wire fraud and money laundering in an investment fraud scheme in February 2018.
From January 2014 to May 2017 Mininger allegedly led clients to believe that he needed to use their previously invested funds as part of a new series of investments that he would make or manage.
Instead, Mininger allegedly deposited the funds into his own bank account and used the investors’ money for his personal expenses, reportedly resulting in at least $870,000 in losses to his clients. According to his FINRA BrokerCheck report, Mininger was affiliated with Kovack Securities Inc. in Rocklin, CA from December 2012 until December 2014.
His broker report indicates that Mininger has 8 customer disputes filed against him. Allegations include unauthorized transactions, churning, excessive trading, and misrepresentation.
December 2016 – FINRA barred a former Kovack advisor after allegations against him regarding unsuitable and unauthorized trading. The broker was reportedly registered with Kovack Securities from 2011 until 2015 in Lansdowne, VA. According to his FINRA BrokerCheck report, he has 19 customer complaints filed against him during his career in the securities industry. Allegations include unsuitability, over-concentration, unauthorized investments, and breach of contract, among others. The broker has also reportedly been the subject of at least two regulatory events and one employment separation.
Kovack Securities Lawsuits
Brokerage firms are required to supervise their advisors to ensure that they are complying with FINRA rules. If it can be determined that advisors violated FINRA rules and their employers failed to adequately supervise them, these firms can be held responsible for any resulting losses in a FINRA arbitration claim.
The White Law Group filed a claim against Kovack Securities in 2018 requesting damages for alleged violation of common law fraud, breach of fiduciary duty, negligence, and negligent supervision. The Statement of Claim alleges that the financial advisor made unsuitable investment recommendations by soliciting the purchase of two high risk penny stocks, Marathon Patent Group, Inc. and TrovaGene, Inc.
FINRA Sanctions Kovack Securities
Kovack Securities has also reportedly had issues with regulators, with five actions listed on their broker report, including the following:
August 2022 FINRA censured and fined Kovack Securities $210,000 for supervisory failures in connection with short-term mutual fund trading.
From March 2015 to May 2017, the firm reportedly failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to short-term trading of mutual fund class A shares, which are designed to be long-term investments.
Kovack purportedly failed to allocate reasonable resources to reviewing such trades, did not establish a process reasonably designed to detect short term trading of class A share mutual funds, and did not respond to red flags of unsuitable mutual fund trading by one of its former representatives, according to the AWC.
May 2016 FINRA sanctioned Kovack after it failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts and failed to establish and maintain adequate supervisory procedures related to such.
FINRA’s complaint alleges that Kovack Securities’ failure to apply discounts to eligible purchases resulted in customers paying excessive sales charges of $119,319.27, in violation of FINRA rules. The firm was censured, issued a fine of $125,000, and ordered to pay restitution to affected customers.
FINRA Rule 3110 Supervision
The FINRA supervision rule (FINRA Rule 3110) helps to ensure that firms have effective supervisory systems in place to protect investors and maintain the integrity of the securities markets.
FINRA Rule 3110 is designed to protect investors by requiring firms to establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA rules. This helps to ensure that the firm and its associated persons conduct business in an ethical and compliant manner, reducing the risk of harm to investors.
The rule requires firms to designate one or more qualified individuals to be responsible for supervising the activities of the firm and its associated persons. These individuals are responsible for ensuring that the firm’s supervisory procedures are effective in detecting and preventing violations of securities laws and regulations.
Additionally, the rule requires firms to establish written supervisory procedures that are reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA rules. These procedures should cover all aspects of the firm’s business, including customer interactions, trading activities, and record-keeping requirements.
Firms must also review and monitor customer account activity to detect and prevent potential violations, and conduct periodic inspections of the firm’s offices and other locations where business is conducted.
By requiring firms to establish and maintain an effective supervisory system, FINRA Rule 3110 helps to ensure that investors are protected from fraudulent and unethical behavior. This can help to maintain investor confidence in the securities markets, which is essential for the long-term health and stability of the financial system.
Hiring a FINRA Attorney
When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration. If your broker has defrauded you, you may be able to file a claim with FINRA to seek resolution through arbitration.
FINRA arbitration can be a complex and technical process, and having an experienced attorney who is knowledgeable about securities law can greatly increase your chances of success.
The FINRA attorneys at the White Law Group can help you with many aspects of the arbitration process including evaluating the merits of your claim and determining whether you have a strong case for arbitration.
The White Law Group can assist you in drafting a statement of claim that accurately reflects the allegations of fraud and the damages you are seeking. They will also represent you at the arbitration hearing, present evidence and make arguments on your behalf. They can also negotiate a settlement on your behalf, which may be an option to consider before going to arbitration.
Working with a FINRA attorney can help ensure that your interests are protected throughout the FINRA arbitration process, and that you have the best possible chance of achieving a favorable outcome. Keep in mind, arbitration is generally a faster and less expensive alternative to a traditional court proceeding.
National Securities Attorneys – the White Law Group
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.
If you have concerns regarding investments you purchased through Kovack Securities and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.
For more information on The White Law Group, visit www.whitesecuritieslaw.com.
Tags: broker-dealer review, Jason Mininger, Kovack Securities Last modified: August 18, 2023