Kovack Advisors, Inc.

Allegations: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") FOUND THAT KOVACK ADVISORS, INC. ("KAI") FAILED TO REVIEW THE ACCOUNTS OF ADVISORY CLIENTS IN ITS WRAP FEE PROGRAMS TO DETERMINE WHETHER SUCH PROGRAMS REMAINED SUITABLE FOR THOSE CLIENTS, IN ACCORDANCE WITH KAI'S DISCLOSURES TO CLIENTS AND ITS INTERNAL POLICIES, AND TO ADEQUATELY DISCLOSE CERTAIN FEES TO CLIENTS IN ITS WRAP FEE PROGRAMS. IN GENERAL, THE CLIENTS AT ISSUE PAID AN ALL-INCLUSIVE FEE FOR ASSET MANAGEMENT, TRADE EXECUTION, AND OTHER COSTS ("WRAP CLIENTS"). AT VARIOUS TIMES BEGINNING IN AT LEAST 2015, AND CONTINUING THROUGH AUGUST 2018 WHEN IT STOPPED OFFERING WRAP ACCOUNTS, KAI FAILED TO (I) REVIEW THESE ADVISORY ACCOUNTS FOR INACTIVITY AS REQUIRED UNDER ITS INTERNAL POLICIES AND EXTERNAL DISCLOSURES, TO DETERMINE WHETHER WRAP ACCOUNTS REMAINED IN THE BEST INTEREST OF CLIENTS THAT TRADED INFREQUENTLY, AND (II) ADEQUATELY DISCLOSE TO THESE WRAP CLIENTS THAT THEY WOULD BE CHARGED, IN ADDITION TO THE WRAP ACCOUNT FEE, FOR TRADE EXECUTION BY CERTAIN CLEARING BROKERS PARTICIPATING IN KAI'S WRAP PROGRAM. AS A RESULT, CERTAIN KAI WRAP CLIENTS REMAINED IN WRAP ACCOUNTS DESPITE THE LACK OF ACTIVITY IN THEIR ACCOUNTS, AND/OR PAID TRANSACTION COSTS ON TOP OF THE WRAP ACCOUNT FEE. KAI ALSO FAILED TO ADOPT AND IMPLEMENT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT THE AFOREMENTIONED VIOLATIONS, AND TO CONDUCT ANNUAL COMPLIANCE REVIEWS. THROUGH THIS CONDUCT, KAI WILLFULLY VIOLATED SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT, AND RULE206(4)-7 THEREUNDER. Status: Final Sanction Detail: THE FIRM SHALL CEASE AND DESIST; IS CENSURED; SHALL PAY DISGORGEMENT OF $166,239 AND PREJUDGMENT INTEREST OF $33,274; SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $700,000; AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE ORDER. Summary: KAI HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. ACCORDINGLY, KAI AGREED TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT AND RULE 206(4)-7 PROMULGATED THEREUNDER; KAI IS CENSURED; KAI SHALL PAY DISGORGEMENT OF $166,239 AND PREJUDGMENT INTEREST OF $33,274; KAI SHALL PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $700,000; AND KAI SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE ORDER.