Haselkorn & Thibaut (InvestmentFraudLawyers.com) is currently investigating National Securities Corporation for allegations of financial advisor malpractice. This is a national investigation involving the sales practices and product sales of investment products to clients. Anyone who invested with National Securities in encouraged to get a free investment portfolio review and consultation by the investment fraud lawyers at Haselkorn & Thibaut.
Investors should be aware that the current (February 2020) FINRA Brokercheck report reflects 79 total disclosures. The breakdown of these disclosures are:
- 62 disclosures include regulatory events.
- 2 disclosures reference civil events.
- 15 disclosures reference arbitration matters.
National Securities Corporation is based in Seattle, Washington, and the firm is licensed to operate in 53 U.S. states and American territories. The FINRA Brokercheck report also reflects the main address in Boca Raton, Florida.
In June of 2017, Reuters released the results of a comprehensive investigative report focusing on broker-dealers that currently employ a high concentration of brokers who had red flags on their record with FINRA. National Securities Corporation was included on this list, with Reuters finding that 34.6 percent of the company’s 714 brokers had at least one piece of negative information on their record.
In October 2017, Financial Advisor Magazine published “Firm Does What FINRA Won’t: Rates 30 Worst Brokerage Firms” (10/24/17). See Table 1, Worst Firms by Firms’ Current Brokers’ Histories of Resolved Customer Complaints. Also, see Table 2, Worst Firms Ranked by Pending Customer Complaints.
Breach of Fiduciary Duty and Broker Negligence
In December 2016, a FINRA arbitration panel found against the is the brokerage and one of its representatives in a case involving allegations including a breach of fiduciary duty. This case was related to a National Securities Corporation customer’s purchase of a large number of shares in a company called Islet Sciences. Notably, this was a penny stock. The investor alleged that a National Securities Corporation’s financial advisor negligently misrepresented a penny stock investment. The FINRA arbitration panel agreed with this investor, awarding $155,000.
In February of 2015, National Securities Corporation’s financial advisor John Joseph Labarca (CRD#: 2030473) was permanently barred from the securities industry for allegedly committing serious misconduct, including failing to produce requested documents and failing to cooperate with FINRA investigators and enforcement staff. While employed as a financial advisor at National Securities Corporation, Mr. Labarca was based in an office in Houston, Texas. During that time, an investor accused him of making unauthorized trades and churning his brokerage account. The dispute went before a FINRA arbitration panel, which found in favor of the investor, awarding him $504,443.04.
National Securities Corporation’s financial advisors allegedly made unsuitable recommendations. In December 2013, a FINRA arbitration panel awarded a Colorado investor more than $219,000 in damages for losses related to a National Securities Corporation’s financial advisor’s recommendations that she put her money into unsuitable mutual funds.
A Failed High-Risk Private Placement
A private placement investment is notoriously risky for most main street type investors. As such, financial advisors and their firms must conduct proper due diligence before making any such recommendations. In 2011, National Securities Corporation was publicly censured and ordered to pay $175,000 in restitution to affected investors for its misconduct relating to a failed private placement. Even with private placements, brokerage firms like National Securities Corporation still have a legal duty to ensure that the specific investment in question is suitable for any of their clients that they are pushing it on. FINRA investigators found that the firm failed to properly protect the best interests of its clients because its brokers recommended a very high-risk private placement to investors who had no business being in such an investment.
Failed to Comply
In December 2019, a former National Securities Corporation financial advisor (Todd Joseph Heinrich) was suspended by FINRA for allegedly failing to comply with a FINRA arbitration award or settlement agreement.
Failure to Supervise
The State of Indiana Securities Division and National Securities Corporation entered into an Order of Consent and agreed in December 2013 to a fine for failure to properly supervise a financial advisor doing business in Indiana. The Indiana Securities Division alleged the financial advisor was not yet properly registered in Indiana when he was opening accounts with clients residing in Indiana. As alleged, a National Securities Corporation supervisor approved the new accounts at the time as well.
National Securities Corporation entered into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA in which the firm was censured and ordered to pay restitution of $175,000 for failing to have reasonable grounds to believe that private placements offered by Provident Royalties, LLC and Medical Capital Holdings, Inc. were suitable for any customer. As alleged, National Securities Corporation failed to conduct adequate due diligence of private placements offered and failed to establish, maintain and enforce a sufficient supervisory system designed to comply with rules in connection with the sale of private placements. Even when the issuers of these investments failed to make timely interest payments and defaulted on principal payments, National Securities Corporation continued to allow its representatives to sell additional offerings. The missed interest payments and defaults, according to FINRA, should have been a red flag to National Securities Corporation of possible problems with the private placement offerings. (See: FINRA Case #2009019068201).