Momentum Independent Network Inc.

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT HAD INADEQUATE SUPERVISORY SYSTEMS AND WRITTEN SUPERVISORY PROCEDURES (WSPS) TO SUPERVISE ITS VARIABLE ANNUITY (VA) SECURITIES BUSINESS. THE COMPLAINT ALLEGES THAT THE FIRM FAILED TO ESTABLISH AND MAINTAIN SPECIFIC SUPERVISORY SYSTEMS AND WSPS THAT WERE DESIGNED TO SUPERVISE ITS VA SECURITIES BUSINESS AND TO ACHIEVE COMPLIANCE WITH APPLICABLE RULES AND REGULATIONS. MOREOVER, THESE FAILURES ALSO CAUSED THE FIRM TO FAIL TO COMPLY WITH THE GENERAL SUPERVISORY REQUIREMENTS OF FINRA'S RULE. THE COMPLAINT ALSO ALLEGES THAT IN CONNECTION WITH VA TRANSACTIONS RECOMMENDED BY THE FIRM'S REGISTERED REPRESENTATIVES, ITS SECURITIES PRINCIPALS DID NOT HAVE A REASONABLE BASIS TO BELIEVE THAT CERTAIN OF THE TRANSACTIONS THAT THEY APPROVED WERE IN FACT SUITABLE FOR THE CUSTOMERS. BECAUSE THESE SECURITIES PRINCIPALS PERFORMED INADEQUATE SUPERVISORY REVIEWS OF VARIABLE ANNUITY TRANSACTIONS. THE COMPLAINT FURTHER ALLEGES THAT IN AT LEAST 43 INSTANCES THE FIRM FAILED HAVE A REGISTERED PRINCIPAL REVIEW AND DETERMINE WHETHER HE OR SHE APPROVED OF THE RECOMMENDED PURCHASE OR EXCHANGE OF THE DEFERRED VA PRIOR TO THE TRANSMISSION OF THE CUSTOMER'S APPLICATION FOR THE DEFERRED VA TO THE ISSUING INSURANCE COMPANY FOR PROCESSING. IN ADDITION, THE COMPLAINT ALLEGES THAT THE FIRM FAILED TO IMPLEMENT SURVEILLANCE PROCEDURES TO DETERMINE IF ANY OF ITS ASSOCIATED PERSONS HAD RATES OF EFFECTING DEFERRED VA EXCHANGES THAT RAISED FOR REVIEW WHETHER SUCH RATES OF EXCHANGES EVIDENCED CONDUCT INCONSISTENT WITH THE APPLICABLE PROVISIONS OF NASD AND FINRA RULES, OTHER APPLICABLE FINRA RULES, OR THE FEDERAL SECURITIES LAWS ("INAPPROPRIATE EXCHANGES"). THE FIRM ALSO FAILED TO HAVE POLICIES AND PROCEDURES DESIGNED TO IMPLEMENT CORRECTIVE MEASURES TO ADDRESS INAPPROPRIATE EXCHANGES AND THE CONDUCT OF ASSOCIATED PERSONS WHO ENGAGE IN INAPPROPRIATE EXCHANGES. MOREOVER, THE COMPLAINT ALLEGES THAT THE FIRM FAILED TO DEVELOP AND DOCUMENT SPECIFIC TRAINING POLICIES OR PROGRAMS TO ENSURE THAT REGISTERED PRINCIPALS WHO REVIEWED VA TRANSACTIONS HAD ADEQUATE KNOWLEDGE TO MONITOR FOR COMPLIANCE WITH FINRA RULES. Status: Pending Summary: DUPLICATE OCCURRENCE SUBMITTED IN ERROR.

Allegations: NASD RULE 2110 - REPONDENT MEMBER SOLD SHARES ISSUED BY MUTUAL FUNDS WITHOUT PROVIDING CERTAIN CUSTOMERS WITH BREAKPOINT DISCOUNTS DESCRIBED IN THE PROSPECTUSES OF THE FUNDS; FAILED TO GIVE ITS CUSTOMERS BREAKPOINT DISCOUNTS IN 89.69% OF ELIGIBLE MUTUTAL FUND TRANSACTIONS IN 2001 AND 2002 THAT RESULTED IN MISSED BREAKPOINTS THAT WOULD HAVE REDUCED CUSTOMERS' CHARGES BY AT LEAST $66,468 ON THEIR PURCHASES OF MUTUAL FUND SHARES WITH FRONT-END LOADS DURING THE RELEVANT PERIOD. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATION, RESPONDEDNT FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS CENSURED, FINED $66,468, AND REQIRED TO PROVIDE WRITTEN NOTIFICATION TO EACH CUSTOMER WHO PURCHASED FRONT-END LOAD MUTUAL FUNDS THROUGH THE FIRM FROM JANUARY 1, 1999 TOHROUGH NOVEMBER 3, 2003 THAT THE FIRM EXPERIENCED A PROBLEM DELIVERING BREAKPOINT DISCOUNTS AND THAT AS A RESULT, THE CUSTOMER MAY BE ENTITLED TO A REFUND; PERFORM A TRADE-BY-TRADE ANALYSIS OF ALL FRONT-END LOAD MUTUAL FUND PURCHASES OF $2500 OR MORE AND ALL OVERCHARGES IDENTIFIED REFUNDED BY MARCH 31, 2004; PROVIDE REFUNDS TO ALL CUSTOMERS WHO DID NOT RECEIVE ALL APPLICABLE BREAKPOINT DISCOUNTS AS DESCRIBED IN NTM 03-47; PROVIDE NASD A REPORT ON RESPONDENT'S REFUND PROGRAM BY 04/16/04; AND NOT LATER THAN SIX MONTHS AFTER THE DATE OF THIS ORDER, RESPONDENT'S CHIEF EXECUTIVE OFFICER OR ANOTHER SENIOR EXECUTIVE OFFICER SHALL CERTIFY IN WRITING TO NASD THAT RESPONDENT HAS IMPLEMENTED PROCEDURES AND A SYSTEM FOR APPLYING SUCH PROCEDURES THAT CAN REASONABLY BE EXPECTED TO PREVENT AND DETECT FAILURES TO PROVIDE BREAKPOINT DISCOUNTS FOR WHICH CUSTOMERS ARE ELIGIBLE ON PURCHASES OF FRONT-END LOAD MUTUAL FUNDS.

Allegations: VIOLATIONS OF ARTICLE III, SECTIONS 1 AND 27 OF THE RULES OF FAIR PRACTICE: WALTER EFFECTED UNAUTHORIZED TRANSACTIONS IN PUBLIC CUSTOMER ACCOUNTS AND SWITCHED SECURITIES IN SUCH ACCOUNTS THROUGH TRANSACTIONS CONSISTING OF THE PURCHASE AND SALE OF INVESTMENT COMPANY SHARES, WITHOUT CUSTOMER AUTHORIZATION WHEN SUCH TRANSACTIONS INVOLVED THE SAME-DAY PURCHASE AND SALE OF INVESTMENT COMPANY SHARES HAVING THE SAME OR SIMILAR INVESTMENT OBJECTIVES AND WHEN SUCH TRANSACTIONS WERE EFFECTED FOR THE PRIMARY PURPOSE OF INCREASING THE COMMISSION INCOME OF WALTER AND NOT FOR THE BENEFIT OF THE CUSTOMER; AND THE FIRM FAILED TO MAINTAIN ADEQUATE WRITTEN SUPERVISORY PROCEDURES AND A SUPERVISORY SYSTEM SO AS TO PREVENT THE AFOREMENTIONED ACTIVITIES Status: Final Sanction Detail: 11/30/1995, THE DECISION AND ORDER OR ACCEPTANCE OF OFFER OF SETTLEMENT WAS ISSUED; WALTER IS CENSURED, FINED $20,000 ($15,000 WHICH REPRESENTS DISGORGED COMMISSSIONS) AND SUSPENDED FROM ASSOCIATION WITH ANY NASD MEMBER FOR 5 BUSINESS DAYS. THE COMPLAINT WAS DISMISSED AS TO THE FIRM REGARDING THE FIRM'S FAILURE TO SUPERVISE IN THAT THERE HAD BEEN NO CUSTOMER LOSS AND THE CUSTOMER HAS BEEN OFFERED CANCELLATION OR RECISSION OF THE TRANSACTIONS INVOLVED; WALTER WAS TERMINATED AS A RESULT OF THE FIRST SWITCH AND THE SECOND ATTEMPTED SWITCH; AND THE FIRM HAS REVISED ITS WRITTEN SUPERVISORY PROCEDURES AS DIRECTED BY THE COMMITTEE TO INSURE THAT FUTURE ACTIVITIES OF THIS TYPE WILL BE MONITORED MORE CLOSELY. Summary: COMPLAINT NO. C06940050 FILES 12/20/1994 BY DISTRICT NO. 6 AGAINST BROKERS TRANSACTIONS SERVICE, INC. (THE FIRM) AND ROSSI LAMONT WALTER ALLEGING VIOLATIONS OF ARTICLE III, SECTIONS 1 AND 27 FO THE RULES OF FAIR PRACTICE IN THAT WALTER EFFECTED UNAUTHORIZED TRANSACTIONS IN THE ACCOUNTS OF A PUBLIC CUSTOMER; AND THE FIRM FAILED TO ADEQUATELY SUPERVISE THE ACTIVITIES OF THE RESPONDENT WALTER. AMENDED COMPLAINT NO. C06940050 FILED 6/27/1995 BY DISTRICT 6 AGAINST FIRM AND ROSSI LAMONT WALTER ALLEGING VIOLATIONS OF ARTICLE III, SECTIONS 1 AND 27 OF THE RULES OF FAIR PRACTICE: WALTER EFFECTED UNAUTHORIZED TRANSACTIONS IN PUBLIC CUSTOMER ACCOUNTS AND SWITCHED SECURITIES IN SUCH ACCOUNTS THROUGH TRANSACTIONS CONSISTING OF THE PURCHASE AND SALE OF INVESTMENT COMPANY SHARES, WITHOUT THE CUSTOMER AUTHORIZATION WHEN SUCH TRANSACTIONS INVOLVED THE SAME-DAY PURCHASE AND SALE OF INVESTMENT COMPANY SHARES HAVING THE SAME OR SIMILAR INVESTMENT OBJECTIVES AND WHEN SUCH TRANSACTIONS WERE EFFECTED FOR THE PRIMARY PURPOSE OF INCREASING THE COMMISSION INCOME OF WALTER AND NOT FOR THE BENEFIT OF THE CUSTOMER; THE FIRM FAILED TO MAINTAIN ADEQUATE WRITTEN SUPERVISORY PROCEDURES AND A SUPERVISORY SYSTEM SO AS TO PREVENT THE AFOREMENTIONED ACTIVITIES; 11/30/1995, THE DECISION AND ORDER OF ACCEPTANCE OF OFFER OF SETTLEMENT WAS ISSUED; WALTER IS CENSURED, FINED $20,000 ($15,000 WHICH REPRESENTS DISGORGED COMMISSIONS) SUSPENDED FROM ASSOCIATION WITH ANY NASD MEMBER FOR 5 BUSINESS DAYS. THE COMPLAINT WAS DISMISSED AS TO THE FIRM REGARDING THE FIRM'S FAILURE TO SUPERVISE IN THAT THERE HAD BEEN NO CUSTOMER LOSS AND THE CUSTOMER HAS BEEN OFFERED CANCELLATION OR RECISSION OF THE TRANSACTIONS INVOLVED; WALTER WAS TERMINATED AS A RESULT OF THE FIRST SWITCH AND THE SECOND ATTEMTPED SWITCH; AND, THE FIRM HAS REVISED ITS WRITTEN SUPERVISORY PROCEDURES AS DIRECTED BY THE COMMITTEE TO INSURE THAT FUTURE ACTIVITIES OF THIS TYPE WILL BE MONITORED MORE CLOSELY.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS [REGIONAL OSJ] CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT ACTING THROUGH HIM, ITS REGIONAL OFFICES OF SUPERVISORY JURISDICTION (OSJ) MANAGER, HIS MEMBER FIRM FAILED TO REASONABLY SUPERVISE A REGISTERED REPRESENTATIVE'S UNSUITABLE INVESTMENT RECOMMENDATIONS TO CUSTOMERS. THE FINDINGS STATED THAT THE FIRM REGISTERED REPRESENTATIVE ENGAGED IN UNSUITABLE SHORT-TERM TRADING AND SWITCHING IN OPEN-END MUTUAL FUNDS AND/OR UNIT INVESTMENT TRUSTS IN FOUR DIFFERENT CUSTOMER ACCOUNTS, AND ENGAGED IN UNSUITABLE TRADING IN CLOSED-END FUNDS IN TWO OF THE FOUR CUSTOMERS' ACCOUNTS. THREE OF THE FOUR INVESTORS LOST A TOTAL OF $5,329.75 AS A RESULT OF THE REPRESENTATIVE'S UNSUITABLE TRADING ACTIVITY. SPECIFICALLY, IN SEVEN INSTANCES, THE FIRM, ACTING THROUGH [REGIONAL OSJ], FAILED TO OBTAIN REQUIRED SWITCH LETTERS FROM THE REPRESENTATIVE FOR CERTAIN OPEN-END MUTUAL FUND AND/OR UNIT INVESTMENT TRUST TRANSACTIONS THAT THE REPRESENTATIVE HAD EXECUTED IN CUSTOMER ACCOUNTS. THE FIRM'S WRITTEN SUPERVISORY PROCEDURES (WSPS) REQUIRED THE COMPLETION OF A SWITCH LETTER ANYTIME A CUSTOMER SWITCHED FROM A VARIABLE PRODUCT, OPEN-END MUTUAL FUND OR UNIT INVESTMENT TRUST TO ANOTHER SIMILAR SECURITY. [REGIONAL OSJ] WAS ALERTED TO MISSING SWITCH LETTERS VIA AN ALERT FROM THE COMPLIANCE SOFTWARE SYSTEM UTILIZED BY THE FIRM. IN SIX INSTANCES, [REGIONAL OSJ] NOTED THAT HE HAD EMAILED THE REPRESENTATIVE AND REQUESTED THE MISSING SWITCH LETTER. HOWEVER, PRIOR TO RECEIVING A RESPONSE BACK FROM THE REPRESENTATIVE, [REGIONAL OSJ] MARKED EACH ALERT AS "RESOLVED" AND THE ALERT WAS CLOSED WITHOUT THE REQUIRED SWITCH LETTER BEING RECEIVED. EVEN WHEN REQUIRED SWITCH LETTERS WERE SUBMITTED BY THE REPRESENTATIVE, THE FIRM AND [REGIONAL OSJ] FAILED TO FOLLOW-UP ON RED FLAGS IN THE SUBMITTED LETTERS. AS PART OF THE FIRM'S SUPERVISORY SYSTEM, THE FIRM'S SUPERVISORS ALSO RECEIVED ALERTS FOR ACTIVELY TRADED ACCOUNTS. THE FIRM'S WSPS REQUIRED SUPERVISORS TO CONDUCT ACTIVE ACCOUNT REVIEWS THROUGH THE USE OF THE FIRM'S BLOTTERS AND/OR ITS COMPLIANCE SOFTWARE SYSTEM. THE WSPS ALSO REQUIRED THAT THE REVIEWS BE DOCUMENTED BY COMPLETING AN ACTIVE ACCOUNT REVIEW FORM OR DOCUMENTING THE REVIEW IN THE COMPLIANCE SOFTWARE SYSTEM. FROM JULY 2012 TO JANUARY 2014, 12 ACTIVE ACCOUNT ALERTS WERE TRIGGERED BY TRADING ACTIVITY IN THE REPRESENTATIVE'S CUSTOMER ACCOUNTS, INCLUDING EIGHT FOR THE ACCOUNTS OF THE FOUR CUSTOMERS AT ISSUE. EACH ALERT WAS "CLOSED BY THE SYSTEM," AND THERE WAS NO DOCUMENTED EVIDENCE THAT ANY ACTION HAD BEEN TAKEN IN RESPONSE TO THE ALERT. [REGIONAL OSJ] DID NOT DOCUMENT HIS REVIEWS BY COMPLETING AN ACTIVE ACCOUNT REVIEW FORM OR MAKING NOTATIONS IN THE COMPLIANCE SOFTWARE SYSTEM AS REQUIRED BY THE FIRM'S WSPS. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE A REASONABLE SUPERVISORY SYSTEM TO DETECT AND PREVENT UNSUITABLE SHORT-TERM TRADING AND/OR SWITCHING OF OPEN-END MUTUAL FUNDS AND UNIT INVESTMENT TRUSTS, AND UNSUITABLE TRADING IN CLOSED-END FUNDS IN CUSTOMER ACCOUNTS. SPECIFICALLY, THE FIRM FAILED TO HAVE A REASONABLE SUPERVISORY SYSTEM TO DETECT PATTERNS OF UNSUITABLE SHORT-TERM TRADING AND/OR SWITCHING OF OPEN-END MUTUAL FUNDS AND UNIT INVESTMENT TRUSTS OR UNSUITABLE TRADING OF CLOSED-END FUNDS. THE PARAMETERS OF THE FIRM'S AUTOMATED COMPLIANCE SOFTWARE SYSTEM WERE TOO LIMITED TO DETECT UNSUITABLE TRADING, AND THE VOLUME OF TRANSACTIONS BEING MANUALLY REVIEWED BY INDIVIDUAL SUPERVISORS WAS TOO HIGH FOR THE SUPERVISOR TO BE ABLE TO REASONABLY DETECT PATTERNS AND TRENDS OF POSSIBLE UNSUITABLE TRADING ACTIVITY. Status: Final Sanction Detail: THE FIRM WAS ORDERED TO PAY A FINE IN THE AMOUNT OF $40,000.00 AND TO PAY $5,329.75 IN RESTITUTION, PLUS INTEREST, TO CUSTOMERS.

Allegations: VIOLATION OF MSRB RULE G-17. DID NOT INCLUDE ALL REPORTABLE CONTRIBUTIONS Status: Final Sanction Detail: $2000.00 FINE PAID 05/01/97

Status: Final Summary: 01/14/2005 - THE DECISION IS NOW FINAL AND EFFECTIVE IMMEDIATELY.

Allegations: VIOLATION OF MSRB RULE G-17. DID NOT INCLUDE ALL REPORTABLE CONTRIBUTIONS Status: Final Sanction Detail: $2000.00 FINE PAID 05/01/97 Summary: $2000.00 FINE PAID 05/01/97

Allegations: THE FIRM WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT IT HAD INADEQUATE SUPERVISORY SYSTEMS AND WRITTEN SUPERVISORY PROCEDURES (WSPS) WHEN IT FAILED TO ESTABLISH AND MAINTAIN SPECIFIC SUPERVISORY SYSTEMS AND WSPS THAT WERE DESIGNED TO SUPERVISE ITS VARIABLE ANNUITY (VA) SECURITIES BUSINESS AND TO ACHIEVE COMPLIANCE WITH APPLICABLE RULES AND REGULATIONS. THE COMPLAINT ALLEGES THAT THESE FAILURES CAUSED THE FIRM TO FAIL TO COMPLY WITH THE GENERAL SUPERVISORY REQUIREMENTS OF FINRA'S RULE. THE COMPLAINT ALSO ALLEGES THAT IN CONNECTION WITH VA TRANSACTIONS RECOMMENDED BY THE FIRM'S REGISTERED REPRESENTATIVES, ITS SECURITIES PRINCIPALS DID NOT HAVE A REASONABLE BASIS TO BELIEVE THAT CERTAIN OF THE TRANSACTIONS THAT THEY APPROVED WERE IN FACT SUITABLE FOR THE CUSTOMERS. BECAUSE THESE SECURITIES PRINCIPALS PERFORMED INADEQUATE SUPERVISORY REVIEWS OF VARIABLE ANNUITY TRANSACTIONS. THE COMPLAINT FURTHER ALLEGES THAT IN AT LEAST 43 INSTANCES THE FIRM FAILED HAVE A REGISTERED PRINCIPAL REVIEW AND DETERMINE WHETHER HE OR SHE APPROVED OF THE RECOMMENDED PURCHASE OR EXCHANGE OF THE DEFERRED VA PRIOR TO THE TRANSMISSION OF THE CUSTOMER'S APPLICATION FOR THE DEFERRED VA TO THE ISSUING INSURANCE COMPANY FOR PROCESSING. IN ADDITION, THE COMPLAINT ALLEGES THAT THE FIRM FAILED TO IMPLEMENT SURVEILLANCE PROCEDURES TO DETERMINE IF ANY OF ITS ASSOCIATED PERSONS HAD RATES OF EFFECTING DEFERRED VA EXCHANGES THAT RAISED FOR REVIEW WHETHER SUCH RATES OF EXCHANGES EVIDENCED CONDUCT INCONSISTENT WITH THE APPLICABLE PROVISIONS OF NASD AND FINRA RULES, OTHER APPLICABLE FINRA RULES, OR THE FEDERAL SECURITIES LAWS ("INAPPROPRIATE EXCHANGES"). THE FIRM ALSO FAILED TO HAVE POLICIES AND PROCEDURES DESIGNED TO IMPLEMENT CORRECTIVE MEASURES TO ADDRESS INAPPROPRIATE EXCHANGES AND THE CONDUCT OF ASSOCIATED PERSONS WHO ENGAGE IN INAPPROPRIATE EXCHANGES. MOREOVER, THE COMPLAINT ALLEGES THAT THE FIRM FAILED TO DEVELOP AND DOCUMENT SPECIFIC TRAINING POLICIES OR PROGRAMS TO ENSURE THAT REGISTERED PRINCIPALS WHO REVIEWED VA TRANSACTIONS HAD ADEQUATE KNOWLEDGE TO MONITOR FOR COMPLIANCE WITH FINRA RULES. Status: Final Sanction Detail: THE FIRM WAS FINED $50,000 AND ORDERED TO PAY HEARING COSTS IN THE AMOUNT OF $7,476.32. Summary: EXTENDED HEARING PANEL DECISION RENDERED AUGUST 13, 2015 WHEREIN THE FIRM IS FINED $50,000. THE SANCTION WAS BASED ON FINDINGS THAT THE FIRM'S SUPERVISORY SYSTEM AND ITS WRITTEN SUPERVISORY PROCEDURES (WSPS) WERE NOT REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE RULES AND REGULATIONS BECAUSE THE WSPS FAILED TO SET FORTH ADEQUATELY THE SUITABILITY REVIEW PROCESS FOR CERTAIN VARIABLE ANNUITY TRANSACTIONS AND THE TIME FOR TRANSMITTING VARIABLE ANNUITY APPLICATIONS TO THE ISSUING INSURER. THE FINDINGS STATED THAT FINRA DID NOT PROVE, BY A PREPONDERANCE OF THE EVIDENCE, THAT THE FIRM'S PRINCIPALS WHO REVIEWED THE SPECIFIC VARIABLE ANNUITY TRANSACTIONS CITED BY FINRA LACKED A REASONABLE BASIS TO BELIEVE THAT THE TRANSACTIONS WERE SUITABLE FOR THE CUSTOMERS. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO IMPLEMENT ADEQUATE SURVEILLANCE PROCEDURES TO MONITOR ITS REGISTERED REPRESENTATIVES' RATES OF EFFECTING VARIABLE ANNUITY EXCHANGES, BUT FINRA DID NOT PROVE, BY A PREPONDERANCE OF THE EVIDENCE, THAT THE FIRM LACKED POLICIES OR PROCEDURES REASONABLY DESIGNED TO IMPLEMENT CORRECTIVE MEASURES TO ADDRESS INAPPROPRIATE EXCHANGES OR THE CONDUCT OF ASSOCIATED PERSONS WHO ENGAGED IN INAPPROPRIATE EXCHANGES. THE FINDINGS ALSO INCLUDED THAT FINRA DID NOT PROVE BY A PREPONDERANCE OF THE EVIDENCE THAT THE FIRM FAILED TO DEVELOP AND DOCUMENT ADEQUATE TRAINING POLICIES AND PROCEDURES FOR ITS PRINCIPALS WHO REVIEWED VARIABLE ANNUITY TRANSACTIONS. IF NO FURTHER ACTION IS TAKEN THE DECISION WILL BECOME FINAL SEPTEMBER 30, 2015.

Status: Final

Allegations: SEC IA RELEASE 40-5393, SEPTEMBER 30, 2019: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED AGAINST HILLTOP SECURITIES INDEPENDENT NETWORK INC. AND ITS AFFILIATE HILLTOP SECURITIES INC ("RESPONDENTS"). ON THE BASIS OF THIS ORDER AND RESPONDENTS' OFFER, THE COMMISSION FINDS THAT THESE PROCEEDINGS ARISE OUT OF BREACHES OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURES BY THE RESPONDENTS IN CONNECTION WITH THEIR MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND THE FEES THEY RECEIVED. AT TIMES DURING THE RELEVANT PERIOD, RESPONDENTS PURCHASED, RECOMMENDED, OR HELD FOR ADVISORY CLIENTS MUTUAL FUND SHARE CLASSES THAT CHARGED 12B-1 FEES INSTEAD OF LOWER-COST SHARE CLASSES OF THE SAME FUNDS FOR WHICH THE CLIENTS WERE ELIGIBLE. RESPONDENT RECEIVED 12B-1 FEES IN CONNECTION WITH THESE INVESTMENTS. RESPONDENTS FAILED TO DISCLOSE IN THEIR FORM ADV OR OTHERWISE THE CONFLICTS OF INTEREST RELATED TO (A) THEIR RECEIPT OF 12B-1 FEES, AND/OR (B) THEIR SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. DURING THE RELEVANT PERIOD, RESPONDENTS RECEIVED 12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD SUCH MUTUAL FUND SHARE CLASSES. AS A RESULT OF THE CONDUCT, RESPONDENTS WILLFULLY VIOLATED SECTION 206(2) OF THE ADVISERS ACT. Status: Final Sanction Detail: THE RESPONDENTS SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT. RESPONDENTS ARE CENSURED, SHALL COLLECTIVELY PAY DISGORGEMENT OF $736,497.48 AND PREJUDGMENT INTEREST OF $74,287.92, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. Summary: RESPONDENTS HVE SUBMITTED AN OFFER OF SETTLEMENT WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. IN VIEW OF THE FOREGOING, THE COMMISSION DEEMS IT APPROPRIATE IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN THE RESPONDENTS' OFFER. ACCORDINGLY, IT IS ORDERED THAT RESPONDENTS SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 206(2) OF THE ADVISERS ACT. RESPONDENTS' ARE CENSURED, SHALL COLLECTIVELY PAY DISGORGEMENT OF $736,497.48 AND PREJUDGMENT INTEREST OF $74,287.92, AND SHALL COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. RESPONDENTS SELF-REPORTED TO THE COMMISSION THE VIOLATIONS DISCUSSED IN THIS ORDER PURSUANT TO THE DIVISION OF ENFORCEMENT'S SHARE CLASS SELECTION DISCLOSURE INITIATIVE ("SCSD INITIATIVE"). ACCORDINGLY, THIS ORDER AND RESPONDENTS' OFFER ARE BASED ON THE INFORMATION SELF-REPORTED BY RESPONDENT.

Status: Final Sanction Detail: CEASE AND DESIST, CENSURE, DISGOREMENT, AND MONETARY FINE.

Allegations: THE SEC FOUND THAT, BETWEEN JANUARY 2016 AND APRIL 2018, THE FIRM OBTAINED BONDS FOR ITS INVENTORY BY PLACING ORDERS WITH A CO-MANAGING UNDERWRITER AND THAT A REGISTERED REPRESENTATIVE OF THE CO-MANAGING UNDERWRITER PLACED THE FIRM'S STOCK ORDERS WITH THE SENIOR MANAGER AND MISCHARACTERIZED THEM AS RETAIL CUSTOMER ORDERS. THE SEC ALSO FOUND THAT DURING THIS PERIOD, ON OCCASION, THESE ORDERS WERE PLACED FOR OFFERINGS WHERE THE FIRM WAS ACTING AS A CO-MANAGING UNDERWRITER, AND THE SENIOR MANAGER WAS NOT INFORMED THAT THE ORDERS WERE FOR THE FIRM, WHICH IN SOME INSTANCES WAS CONTRARY TO SYNDICATE RULES. THE SEC FOUND THAT, AMONG OTHER THINGS, THE FIRM LACKED POLICIES AND PROCEDURES WITH RESPECT TO HOW STOCK ORDERS WERE SUBMITTED FOR NEW ISSUES BONDS TO THIRD PARTIES, INCLUDING THE BROKER-DEALER THAT MISCHARACTERIZED THE FIRM'S ORDERS. THE SEC FOUND WILLFUL VIOLATIONS OF MSRB RULES G-27 AND G-17, SECTION 15B(C)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 (EXCHANGE ACT), AND A FAILURE TO REASONABLY SUPERVISE WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO A CENSURE, TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 15B(C)(1) OF THE EXCHANGE ACT AND MSRB RULES G-17 AND G-27, AND TO PAY DISGORGEMENT IN THE AMOUNT OF $206,606, PREJUDGMENT INTEREST IN THE AMOUNT OF $48,587, AND A CIVIL MONEY PENALTY IN THE AMOUNT OF $85,000. THE PENALTY, DISGORGEMENT AND PREJUDGMENT INTEREST WERE PAID ON OR AROUND JULY 22, 2021. Summary: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO A CENSURE, TO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 15B(C)(1) OF THE EXCHANGE ACT AND MSRB RULES G-17 AND G-27, AND TO PAY DISGORGEMENT IN THE AMOUNT OF $206,606, PREJUDGMENT INTEREST IN THE AMOUNT OF $48,587, AND A CIVIL MONEY PENALTY IN THE AMOUNT OF $85,000. THE PENALTY, DISGORGEMENT AND PREJUDGMENT INTEREST WERE PAID ON OR AROUND JULY 22, 2021.

Allegations: SEE DRP FILED FOR LISTED AFFILIATE. Status: Final

Allegations: NASD RULES 2110, 3010, 6230(A): THE FIRM FAILED TO REPORT TO TRACE TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES EXECUTED ON A BUSINESS DAY DURING TRACE SYSTEM HOURS WITHIN 15 MINUTES OF THE TIME OF EXECUTION; THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND NASD RULES RELATING TO COMPLIANCE WITH TRACE REPORTING. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, RESPONDENT MEMBER FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, FIRM IS CENSURED, FINED $10,000 AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES WITH RESPECT TO COMPLIANCE WITH THE SECURITIES LAWS, REGULATIONS AND NASD RULES RELATING TO TRACE REPORTING. WITHIN 30 DAYS, THE FIRM SHALL SUBMIT TO NASD A REPRESENTATION THAT THE FIRM HAS REVISED ITS SUPERVISORY PROCEDURES TO ADDRESS DEFICIENCIES AND THE DATE THE REVISED PROCEDURES WERE IMPLEMENTED.

Allegations: FOR THE PERIOD JANUARY 2003 THROUGH FEBRUARY 2004, M.L. STERN ACTED AS AN UNDERWRITER IN PRIMARY OFFERINGS OF MUNICIPAL SECURITIES AND WAS REQUIRED TO FILE OR CAUSE TO BE FILED MSRB FORM G-36 WITH THE MSRB. IN FIVE OF THESE OFFERINGS, ML STERN FILED THE FORMS LATE. PURSUANT TO RULE G-32, AS AN UNDERWRITER, MLS WAS REQUIRED TO MAIL TO CUSTOMERS AN OFFICIAL STATEMENT. M.L. STERN FAILED TO TIMELY DELIVER OFFICIAL STATEMENTS TO CUSTOMERS IN TWO OF THOSE OFFERINGS. Status: Final Sanction Detail: FINE OF $5,000.00

Allegations: ON OR ABOUT THE PERIOD 9/19/2002 THROUGH 11/22/2002, THE COMPANY FAILED TO COMPLY WITH MSRB RULE G-14 IN THAT IT INACCURATELY REPORTED AS MUNICIPAL TRANSACTION 102 CUSTOMER TRANSACTIONS INVOLVING CORPORATE SECURITIES OF THREE ISSUERS. IN CONNECTION WITH THE FOREGOING TRANSACTIONS, THE COMPANY FAILED TO COMPLY WITH G-17 IN THAT I CAUSED ERRONEOUS MUNICIPAL FILINGS TO BE MADE, INCLUDING MUNICIPAL DISCLOSURE LETTERS TO CUSTOMERS, APPLICATIONS FOR MUNICIPAL CUSIPS, AND FILINGS PURSUANT TO G-36, G-37, AND G-38 Status: Final Sanction Detail: A FINE IN THE AMOUNT OF $5,000.00. Summary: M.L. STERN ACCEPTED THE AWC WITHOUT ADMITTING OR DENYING THE ALLEGATIONS OR FINDINGS.

Allegations: DURING THE PERIOD FROM NOVEMBER 9, 2002 TO MARCH 10, 2003, TWO REGISTERED PERSONS WERE PERMITTED TO ACT AS REGISTERED REPRESENTATIVES WHILE THEIR REGISTRATIONS WERE INACTIVE DUE TO FAILURE TO COMPLETE CONTINUING EDUCATION IN A TIMELY MANNER. FAILURE WAS DUE TO A CLERICAL ERROR. Status: Final Sanction Detail: M.L. STERN PAID A FINE IN THAT AMOUNT OF $3,000.00. Summary: M.L. STERN ACCEPTED AND CONSENTED WITHOUT ADMITTING OR DENYING THE ALLEGATIONS OR FINDINGS THAT DURING THE PERIOD FROM NOVEMBER 9, 2002 TO MARCH 10, 2003, TWO REGISTERED PERSONS WERE PERMITTED TO ACT AS REGISTERED REPRESENTATIVES WHILE THEIR REGISTRATIONS WERE INACTIVE DUE TO FAILURE TO COMPLETE CONTINUING EDUCATION IN A TIMELY MANNER.

Allegations: ON NOVEMBER 29, 2000, M.L. STERN FAILED TO COMPLY WITH MSRB RULE G-14 IN THAT IT INACCURATELY REPORTED THE TIME OF EXECUTION ON APPROXIMATELEY FIFTY ONE MUNICIPAL SECURITIES TRANSACTIONS REPORTED BY IT TO THE MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB). Status: Final Sanction Detail: M.L. STERN AGREED TO A FINE OF $1,000.00.

Allegations: FINRA RULES 2010, 6622(G), NASD RULES 2110, 3010, 6620(G) - SOUTHWEST SECURITIES, INC. REPORTED TO THE OTC REPORTING FACILITY LAST SALE REPORTS OF TRANSACTIONS IN OTC EQUITY SECURITIES IT WAS NOT REQUIRED TO REPORT. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND FINRA RULES CONCERNING TRADE REPORTING FOR TRANSACTIONS EXECUTED AND REPORTED BY WAY OF A GIVE-UP AGREEMENT. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM WAS CENSURED AND FINED $12,500.

Summary: SEE DOCKET/CASE NUMBER 2011025621401 ON SOUTHWEST SECURITIES, INC. CRD.

Allegations: FAILURE TO COMPLY WITH ORDER 2021-12 REQUIRING AN ON-SITE INSPECTION OF THE FIRM'S BRANCH OFFICE LOCATED IN MAINE. Status: Final Sanction Detail: $2,500.00 CIVIL FINE. Summary: THE MAINE OFFICE OF SECURITIES ALLEGED THAT THE FIRM FAILED TO COMPLY WITH ADMINISTRATIVE ORDER 2021-12 REQUIRING AN ON-SITE INSPECTION OF ONE BRANCH OFFICE LOCATION. THIS MATTER WAS RESOLVED BY CONSENT AGREEMENT AND THE PAYMENT OF A $2,500.00 CIVIL FINE ON 08/22/2023.

Allegations: A REGISTERED REPRESENTATIVE OF THE FIRM I WAS THEN PRINCIPAL OF SOLICITED SALES IN MINNESOTA PRIOR TO I OR THE FIRM BECOMING REGISTERED IN THAT STATE Status: Final Sanction Detail: CONSENT AGREEMENT PROVIDED THAT I MAKE NO FURTHER CONTACTS WITHOUT FIRST COMPLYING WITH MINNESOTA REGISTRATION REQIREMENTS.

Allegations: SEC ADMINISTRATIVE RELEASE 34-61768, MARCH 24, 2010: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED PURSUANT TO SECTIONS 15(B), 15B(C)(2) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AGAINST SOUTHWEST SECURITIES, INC. ("SOUTHWEST" OR "RESPONDENT"). THESE PROCEEDINGS INVOLVE VIOLATIONS OF THE LAW CONCERNING POLITICAL CONTRIBUTIONS AND MUNICIPAL SECURITIES BUSINESS BY SOUTHWEST, A BROKER-DEALER AND MUNICIPAL SECURITIES DEALER. FROM DECEMBER 2000 TO JULY 2009, A SALES PERSON WITH THE TITLE OF SENIOR VICE PRESIDENT IN SOUTHWEST'S PUBLIC FINANCE OFFICE ("SENIOR VICE PRESIDENT"), ENGAGED IN SOLICITATION ACTIVITIES THAT MADE HIM A "MUNICIPAL FINANCE PROFESSIONAL" UNDER MUNICIPAL SECURITIES RULEMAKING BOARD ("MSRB") RULE G-37. THE SENIOR VICE PRESIDENT MADE POLITICAL CONTRIBUTIONS TO AN INCUMBENT FOR OFFICE WITH INFLUENCE OVER THE AWARDING OF MUNICIPAL SECURITIES BUSINESS BY CERTAIN STATE ISSUERS IN MASSACHUSETTS. WITHIN TWO YEARS OF THESE POLITICAL CONTRIBUTIONS, SOUTHWEST ENGAGED IN MUNICIPAL SECURITIES BUSINESS WITH THE ISSUERS ASSOCIATED WITH THE INCUMBENT WHO RECEIVED THE POLITICAL CONTRIBUTIONS. SOUTHWEST'S ENGAGEMENT IN MUNICIPAL SECURITIES BUSINESS WITH THESE ISSUERS VIOLATED SECTION 15B(C)(1) OF THE EXCHANGE ACT AND MSRB RULE G-37(B). THE CONTRIBUTIONS WERE NOT DISCLOSED ON MSRB FORMS G-37 IN VIOLATION OF MSRB RULE G-37(E). Status: Final Sanction Detail: RESPONDENT HAS SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS HEREIN, EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER IT AND THE SUBJECT MATTER OF THESE PROCEEDINGS, WHICH ARE ADMITTED, RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 15(B), 15B(C)(2) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER. AS A RESULT OF ITS CONDUCT, SOUTHWEST WILLFULLY VIOLATED MSRB RULES G-37(B) AND G-37(E). AS A RESULT OF SOUTHWEST'S WILLFUL VIOLATIONS OF MSRB RULES G-37(B) AND G-37(E), SOUTHWEST WILLFULLY VIOLATED SECTION 15B(C)(1) OF THE EXCHANGE ACT. ACCORDINGLY, PURSUANT TO SECTIONS 15(B), 15B(C)(2), 21B AND 21C OF THE EXCHANGE ACT, IT IS HEREBY ORDERED THAT RESPONDENT SOUTHWEST CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 15B(C)(1) OF THE EXCHANGE ACT, MSRB RULE G-37(B) AND MSRB RULE G-37(E). RESPONDENT SOUTHWEST SHALL, WITHIN 10 DAYS OF THE ENTRY OF THIS ORDER, PAY DISGORGEMENT OF $348,154 AND PREJUDGMENT INTEREST OF $71,993 TO THE UNITED STATES TREASURY. RESPONDENT SOUTHWEST SHALL, WITHIN 10 DAYS OF THE ENTRY OF THIS ORDER, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $50,000 TO THE UNITED STATES TREASURY. IF TIMELY PAYMENT IS NOT MADE, ADDITIONAL INTEREST SHALL ACCRUE PURSUANT TO 31 U.S.C. 3717.