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Next Financial Group: Broker Fraud, Regulatory Actions

Next Financial Group Review - Broker Fraud, and Regulatory Actions, featured by top securities fraud attorneys, The White Law Group

The White Law Group is investigating potential securities claims involving Next Financial Group. 

Next Financial Group (CRD# 46214, Houston, Texas) headquartered in Houston, Texas, is a national financial advisory firm. According to its FINRA Broker Report, the firm reportedly has 32 disclosure events on its broker record including 26 regulatory events, and 3 arbitrations.

On a broker-dealer’s Central Registration Depository (CRD) record, disclosure events typically refer to regulatory actions taken against the broker-dealer by regulatory authorities, customer complaints filed against the broker-dealer, arbitrations involving the broker-dealer, bankruptcies, civil judgments, and other similar matters.

Next Financial Group has had numerous violations with regulators including the alleged sale of fraudulent private placements, excessive trading, and excessive broker commissions. After FINRA fined Next $1.54 million and ordered it to pay $2.1 million in restitution in 2017 the firm apparently adopted new corrective measures, but FINRA claims these procedures were flawed, ultimately allowing more misconduct.

New Hampshire Regulators Sanction Next Financial

March 2024 – New Hampshire has taken action against Charles C. Kulch and Next Financial Group Inc., barring Kulch from selling securities in the state due to allegations of overcharging clients. The settlement, disclosed by the state’s Bureau of Securities Regulation, imposes penalties exceeding $1 million, including client restitution, fines, and investigation costs. Kulch allegedly overcharged clients through “consulting service agreements” (CSAs), according to the New Hampshire order, with many of these fees unlawfully imposed.

FINRA Issues a $750,000 Fine for Supervisory Failures

July 2021 – The Financial Industry Regulatory Authority (FINRA) issued a Letter of Acceptance, Waiver, and Consent (AWC) to NEXT Financial Group, Inc. regarding alleged rule violations. NEXT Financial Group, Inc. consented to the findings without admitting or denying them. The violations include failure to establish a supervisory system to detect and prevent unsuitable short-term trading of mutual funds and municipal bonds, as well as over-concentration of customer accounts in Puerto Rican municipal bonds.

NEXT Financial Group, Inc. violated various FINRA and MSRB rules. As part of the settlement, NEXT Financial Group, Inc. agreed to a censure, a $750,000 fine, and an undertaking to implement supervisory systems to address the violations. The firm waived certain procedural rights and acknowledged that the AWC would become part of its permanent disciplinary record.

Massachusetts Regulators Charge Next Financial with Unsuitable Sales

In a separate instance, Massachusetts Secretary of the Commonwealth William Galvin sanctioned Kulch for unsuitable sales of illiquid, high-commission products, including non-traded REITs and variable annuities. Kulch generated significant commissions from these sales, leading to regulatory scrutiny. Massachusetts Securities Division also reached a settlement with Next Financial, imposing fines for alleged sales practice violations and a failure to supervise, particularly regarding non-traded REIT sales by Kulch.

Texas Regulators Orders Refunds for Customers

February 2020 – Texas Securities Commission orders Next Financial Group to refund $500,000 to customers. 

The Texas Securities Commission ordered Next to refund $500,000 to customers after a registered representative allegedly moved them into and out of A-share mutual funds to purportedly generate commissions.

According to the complaint, from 2014 through 2018, the broker allegedly made hundreds of trades involving the Class A shares of mutual funds, which typically cost investors more than other mutual fund share classes because they carry an upfront sales charge of up to 5% or higher.

The charge, known as a front-end sales load, is paid to the broker as a commission.

The firm agreed to pay a $100,000 fine for purportedly failing to properly supervise the broker, who is reportedly no longer registered with Next or any other firm.

According to the regulator in a news release, Next Financial Group “failed to rein in the agent even though it received hundreds of alerts from the regulatory system it had set up to detect mutual-fund switching.”

FINRA Charges Next Financial with Excessive Trading

December 2017 – FINRA fined Next Financial Group Inc. $750,000 as part of a settlement for several supervisory violations.

From August 2012 through September 2015. Next Financial allegedly failed to detect excessive trading in a senior investor’s accounts that resulted in losses of $392,000 and an unnamed broker generating total gross commissions of $148,000, according to the settlement.

Next Financial had similar problems concerning the supervision of sales of variable annuities, which accounted for a significant part of its revenues, during that time period.

Investigating Potential Claims

All broker-dealers have a responsibility to adequately supervise its 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. 

 Free Consultation with a Securities Attorney

The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois.

If you have concerns regarding investments you purchased through Next Financial Group 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.


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