Kovack Advisors Hit With $900K Regulatory Sanction Over Wrap Fee Charges

Kovack Advisors Hit With $900K Regulatory Sanction Over Wrap Fee Charges

Kovack Advisors Hit With $900K Regulatory Sanction Over Wrap Fee Charges 150 150 Robert Rex, Esq.

Kovack Securities Investigation

August 2022- Ft. Lauderdale, Florida

The Securities and Exchange Commission (SEC) settled charges against registered investment advisor Kovack Advisors, Inc. for misconduct related to its wrap fee program.

In the SEC order, the regulator found that contrary to disclosures made to customers and its own internal policies Kovack failed to review the accounts of clients in the wrap fee program to determine if it was suitable for customers. Some clients remained in the wrap fee program despite the fact there was no activity in their accounts and Kovack failed to adequately explain to customers how they would be charged for certain transaction costs.

These abuses constitute willful violations of the Investment Advisers Act of 1940, according to the SEC. Without admitting or denying the findings, Kovack consented to a cease and desist and to pay disgorgement, interest and a civil penalty totaling about $900,000.

Kovack Advisors, an affiliate of Kovack Securities is a registered investment adviser with principal offices in Ft. Lauderdale, FL. According to recent filings they have assets under management of 3.5 billion managed on a discretionary basis and over a billion more managed on a non-discretionary basis.

Kovack Securities has had some recent regulatory issues as well, including:

  • August 2022- Fined $210,000 and censured to resolve allegations related to its supervisory system pertaining to short term trading of mutual fund class A shares.
  • May 2016- Fined $125,000 and censured to resolve allegations related to sales charges on unit investmetn trusts (UITs).

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

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Rex Securities Law

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