Kovack Advisors Inc., the registered investment advisor arm of independent broker-dealer Kovack Securities Inc., fell into hot water and was fined $985,000 with securities regulators in Delaware for allegedly not accurately reporting a broker’s work history, including a FINRA investigation, when it attempted to hire him in 2021.
The broker at the heart of the matter in question is Robert Prettyman, according to a consent order from November. Prettyman has twice been temporarily barred from the securities industry by the Investor Protection Unit of the Delaware Department of Justice, first in 2021 and again in 2024, according to his BrokerCheck report.
He is not currently registered with a FINRA broker-dealer or registered investment advisors, according to his BrokerCheck profile.
Kovack neither admitted to or denied Delaware’s findings in the matter. A call Friday morning to Kovack’s CEO, Brian Kovack, was not returned.
Kovack Advisors allegedly filed incomplete and inaccurate registration materials, failed to supervise employees, and failed to maintain records and documents that should have been preserved, according to the Delaware Investor Protection Unit.
“In the consent order, the Investor Protection Director found that Kovack filed multiple inaccurate registration forms that failed to disclose a prior investigation into the conduct of one of its representatives,” according to a statement from the Delaware Department of Justice.
The Investor Protection Unit “further found that Kovack provided inaccurate information in response to inquiries made in connection with the investigation, and that the firm failed to preserve documents,” according to the statement.
The Investor Protection Unit also found that when it asked “Kovack about certain pre-employment letters that the firm had inaccurately represented that it had sent and maintained, as required by law, Kovack created dozens of pre-employment letters, inaccurately labeled each as a ‘2nd Request,’ and placed them in its personnel files,” according to the statement.
Over the past few years, Kovack, which is based in Fort Lauderdale, Fla. and works with close to 380 retail reps and advisors, has seen a handful of large regulatory settlements.
Kovack Advisors in 2022 agreed to pay nearly $900,000 to settle charges by the Securities and Exchange Commission that the firm failed to monitor wrap accounts from 2015 through August 2018 to determine whether they were suitable for the clients using them.
Also in 2022, FINRA and Kovack Securities reached a settlement and levied a $210,000 fine with midsize broker-dealer Kovack Securities Inc. over the firm's supervision of trades of mutual fund A shares, which are designed to be long-term investments.
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