Kovack Securities

Kurta Law is investigating securities recommendations made by Kovack Securities representatives. Investors who have concerns should get in touch with our team of experienced securities attorneys. There are a total of 10 disclosures on its BrokerCheck record, and five of those disclosures are regulatory actions alleging violations of securities rules and regulations.

Background Information

Kovack Securities (CRD #: 44848) is a registered brokerage firm with its main address in Ft. Lauderdale, Florida. Kovack Securities also offers investment advisory services through its affiliate, Kovack Advisors, Inc. Investors should ask questions to make sure they get the right type of account and to ensure they understand the associated fees.

Kovack Securities’ business includes, but is not limited to, the following:

• Buying and selling securities (including government municipal bonds)
• Mutual funds
• Variable insurance plans
• Options
• Structured products
• Alternative investments
• Real Estate Investment Trusts (REITs)
• Private placements
• Exchange-traded funds

The firm does not offer account monitoring services, and therefore brokers may not know when your portfolio underperforms. It is therefore essential for investors to regularly review their account statements.

Brokerage Fees and Conflicts of Interest

Kovack Securities charges the following fees. For a complete breakdown of the firm’s fees, review their Brokerage Fee Schedule.

• Transaction-based fees: These commissions create an incentive for brokers to encourage you to trade more often and in larger amounts.
• Exchange-traded funds also feature commissions.
• Bonds charge fees called “mark-ups” or “mark-downs.” These fees may not be immediately obvious since they are built into the price of the security. Ask your broker about these fees.
• Mutual funds, structured products, alternative investments, and insurance products come with sales fees that reduce the value of your investment. According to the Form CRS, these fees typically range from 3% to 10% of the amount of your investment. These higher-cost investments may also charge surrender fees if you choose to cash out early.
• Mutual funds and alternative investments may also charge annual management fees.
• Kovack Securities may also charge you fees for account maintenance, account transfers, ticket charges, wire transfers, and account terminations.

Regulatory Actions

Kurta Law securities attorneys recommend that Kovack customers review the following regulatory actions on Kovack’s record. You can see the complete list in the firm’s detailed BrokerCheck record.

FINRA $210,000 Fine Following Allegations Regarding Mutual Funds

On August 24, 2022, Kovack Securities entered into an Acceptance, Waiver, and Consent agreement (AWC) in which the firm settled with Financial Industry Regulatory Authority (FINRA). AWCs allow firms to settle without admitting or denying the findings.

The AWC alleged that KSI engaged in short-term switches of mutual funds that resulted in unnecessary sales charges. According to the allegations, KSI relied on one person to review all the trading activity for 300 representatives. These reviews allegedly were not reasonably designed to catch unsuitable mutual fund switches. The AWC states that KSI employed a broker who had been terminated for short-term mutual fund switching and failed to place him under heightened supervision for this type of misconduct.

FINRA Supervisory Rules

FINRA Rule 3110 requires that firms establish systems of supervision to ensure their broker’s recommendations comply with FINRA suitability requirements. 

Terms of the AWC

As part of the terms of the AWC, the firm consented to a censure and a $210,000 fine.

Puerto Rico Allegations Concerning Direct Product Placements and Limited Partnership Interests

According to allegations filed on May 1, 2017, the Office of the Commissioner of Financial Institutions of the Government of Puerto Rico (OCFI) alleged that Kovack Securities failed to supervise one representative’s recommendations of alternative investments. The representative allegedly unsuitably overconcentrated these investments. Kovack Securities agreed to reimburse OCFI $100,000 to cover the cost of the examination and to contribute $50,000 to the Trading Investor Education and Investigation Fund. 

$125,000 FINRA Fine Following Allegations Regarding UIT Transactions

According to an AWC dated May 11, 2016, Kovack Securities consented to the findings that it failed to apply sales discounts for Unit Investment Trusts (UITs). As a result, customers allegedly paid excessive sales charges of $119,319.27. The firm had also allegedly failed to establish a supervisory system reasonably designed to ensure customers received sales charge discounts on eligible UIT purchases. The firm allegedly did not effectively train its representatives to identify when such discounts could apply.

Terms of the AWC

The firm consented to a censure and a fine of $125,000. It also agreed to pay $119,319.27 in restitution to customers.

Why Do I Need a Securities Attorney?

Securities attorneys have niche legal expertise – securities disputes usually must go through FINRA arbitration, which is entirely different from a civil case.

What Can I Do If I Lost Money with Kovack Securities?

Contact our securities attorneys for a free case evaluation today: (877) 600-0098 or email info@kurtalawfirm.com. Our attorneys work on contingency, meaning they do not collect any fees unless they win your case.