What changed in this filing

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Item 1. Legal Proceedings

2021-08-02 compared with 2021-05-10 · 81 added, 74 removed, 7 unchanged (96% of the section changed)

Legal Proceedings.

Company is subject to certain legal and other claims that arise in the ordinary course of its business.

In particular, the Company and

its subsidiaries are named in and subject to various proceedings and claims arising primarily from the Company’s securities business

activities, including lawsuits, arbitration claims, class actions, and regulatory matters.

Some of these claims seek substantial compensatory,

punitive, or indeterminate damages.

The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings

by governmental and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements,

fines, penalties, injunctions, and other relief.

In view of the number and diversity of claims against the Company, the number of jurisdictions

in which litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot

state with certainty what the eventual outcome of pending litigation or other claims will be.

The Company is subject to

certain legal and other claims that arise in the ordinary course of its business.

In particular, the Company and its subsidiaries are

named in and subject to various proceedings and claims arising primarily from the Company’s securities business activities, including

lawsuits, arbitration claims, class actions, and regulatory matters.

Some of these claims seek substantial compensatory, punitive, or

indeterminate damages.

The Company and its subsidiaries are also involved in other reviews, investigations, and proceedings by governmental

and self-regulatory organizations regarding the Company’s business, which may result in adverse judgments, settlements, fines, penalties,

injunctions, and other relief.

In view of the number and diversity of claims against the Company, the number of jurisdictions in which

litigation is pending, and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state

with certainty what the eventual outcome of pending litigation or other claims will be.

Notwithstanding this uncertainty, the Company

does not believe that the results of these claims are likely to have a material effect on its financial position or results of operations.

January 5, 2017, complaints filed in November 2015 and May 2016 naming MLV & Co.

(“MLV”) and National Securities Corporation,

each an indirect broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits alleging claims under the Securities

Act, in connection with the offerings of Miller Energy Resources, Inc.

On January 5, 2017, complaints

filed in November 2015 and May 2016 naming MLV & Co.

(“MLV”) and National Securities Corporation, each an indirect

broker-dealer subsidiary of the Company, as defendants in putative class action lawsuits alleging claims under the Securities Act, in

connection with the offerings of Miller Energy Resources, Inc.

(“Miller”), have been consolidated.

The consolidated

Complaint, styled Gaynor v.

Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its predecessor complaints,

continues to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations

and omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013;

June 28, 2013;

The Consolidated Complaint,

styled Gaynor v.

Miller et al., is pending in the Circuit Court for Morgan County, Tennessee, and, like its predecessor complaints, continues

to allege claims under Sections 11 and 12 of the Securities Act against nine underwriters for alleged material misrepresentations and

omissions in the registration statement and prospectuses issued in connection with six offerings (February 13, 2013;

September 26, 2013;

October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of

approximately $151.0 million.

Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution.

discussions are ongoing.

An accrual for the settlement is included in the accompanying consolidated financial statements.

July 3, 2019, a lawsuit was filed against National Securities Corporation, National Asset Management, Inc., National, National’s

current board members and certain former board members, certain officers of National, John Does 1–10, and the National as a nominal

defendant, in the United States District Court for the Southern District of New York, captioned Kay Johnson v.

National Securities Corporation,

et al., Case No.

October 17, 2013 (as to MLV only) and August 21, 2014) with an alleged aggregate offering price of approximately

$151.0 million.

A Court ordered mediation before a federal magistrate took place on August 6, 2019, with no resolution.

In December 2019,

the Court remanded the case to state court.

In July 2020, the Company agreed to settle this matter, subject to court approval which is

expected in 2021.

An accrual for the settlement is included in the accompanying condensed consolidated financial statements.

On July 3, 2019, a lawsuit was filed against National Securities Corporation, (“NSC”) National Asset

Management, Inc., National, National’s current board members and certain former board members, certain officers of National, John

Does 1–10, and the National as a nominal defendant, in the United States District Court for the Southern District of New York, captioned Kay

National Securities Corporation, et al.

1:19-cv-06197-LTS.

The complaint presents three purported derivative causes of action on behalf of the Company, and

five causes of action by the plaintiff directly.

As part of the derivative claims, the complaint generally alleges that certain of the

individual defendants failed to establish and maintain adequate internal controls to ensure that the Board acted in accordance with its

fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing on the part of a National officer.

part of its claims brought directly by the plaintiff, the complaint generally alleges that certain individual and corporate defendants

wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable common law, or conspired to do

The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards to the plaintiff’s

compensation.

The complaint seeks monetary damages in favor of the Company, an order directing the Company’s board members to take

actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff, and attorneys’

fees and costs.

The complaint presents three purported derivative

causes of action on behalf of the Company, and five causes of action by the plaintiff directly.

As part of the derivative claims, the

complaint generally alleges that certain of the individual defendants failed to establish and maintain adequate internal controls to ensure

that the Board acted in accordance with its fiduciary duties to prevent and uncover alleged legal and regulatory misconduct and wrongdoing

on the part of a National officer.

As part of its claims brought directly by the plaintiff, the complaint generally alleges that certain

individual and corporate defendants wrongfully terminated the employment of the plaintiff in violation of the Dodd-Frank Act and applicable

common law, or conspired to do so.

The complaint further alleges that certain corporate defendants violated the Equal Pay Act with regards

to the plaintiff’s compensation.

The complaint seeks monetary damages in favor of the Company, an order directing the Company’s

board members to take actions to enhance the Company’s governance, compensatory and punitive damages in favor of the plaintiff,

and attorneys’ fees and costs.

On February 2, 2020, the plaintiff filed an amended complaint presenting additional causes of action.

The Company has

notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint.

On March 18, 2020, the

defendants filed a motion to dismiss the amended complaint.

The plaintiff filed an opposition to the defendants’ motion to dismiss

on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020.

On August 20, 2020, the

parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021, as a result of the

mediation, the parties reached a settlement agreement.

In March 2021, a settlement agreement and release was executed by the parties

and all claims have been dismissed.

New York Department of Financial Services (the “Department”) completed its investigation of NSC’s compliance with the

Department’s Cybersecurity Requirements for Financial Services Companies (the “Regulations”).

The Regulations establish

standards for the cybersecurity programs of entities the Department licenses or otherwise regulates, including NSC.

On April 14, 2021,

NSC paid the Department a fine of $3.0 million as a result of the Department’s finding that NSC of violated certain of the Regulations.

NSC is a respondent in several Financial Industry Regulatory Authority

(“FINRA”) arbitration proceedings filed by investors alleging claims in connection with equity investments in GPB Capital

Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of National on February 25, 2021.

these arbitration claims, among other things, also allege that NSC failed to supervise certain registered representatives.

evaluating each arbitration claim on its own merits.

GPB and its affiliates have been the subject of various civil claims and fraud investigations

over the past few years and, in February 2021, the U.S.

Department of Justice indicted certain individuals affiliated with GPB for material

misrepresentations and omissions under the federal securities laws with respect to funds managed by GPB.

At the present time, the

Company continues to vigorously defend these actions and is not able to determine the ultimate resolution of these matters.

Adverse judgments

in these matters in the aggregate could materially and adversely affect the Company and its financial condition.

The Company has notified its insurer of the lawsuit and believes it has valid defenses to the asserted claims of the complaint.

18, 2020, the defendants filed a motion to dismiss the amended complaint.

The plaintiff filed an opposition to the defendants’ motion

to dismiss on April 15, 2020, and the defendants filed a reply in further support of the motion to dismiss on May 6, 2020.

On August 20,

2020, the parties entered into mediation with a private mediator in an attempt to settle the action and, on January 15, 2021, as a result

of the mediation, a settlement was reached.

In March 2021, a settlement agreement and release was executed by the parties and all claims

have been dismissed.

The New York Department of

Financial Services (the “Department”) completed its investigation of NSC’s compliance with the Department’s Cybersecurity

Requirements for Financial Services Companies (the “Regulations”).

The Regulations establish standards for the cybersecurity

programs of entities the Department licenses or otherwise regulates, including NSC.

On April 14, 2021, NSC paid the Department a fine

of $3.0 million as a result of the Department’s finding that NSC violated certain of the Regulations.

NSC is a respondent in several

Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings filed by investors alleging claims in connection

with equity investments in GPB Capital Holdings, LLC (“GPB”) involving matters prior to the Company’s acquisition of

National on February 25, 2021.

Some of these arbitration claims, among other things, also allege that NSC failed to supervise certain

registered representatives.

NSC is evaluating each arbitration claim on its own merits.

GPB and its affiliates have been the subject

of various civil claims and fraud investigations over the past few years, and, in February 2021, the U.S.

Department of Justice indicted

certain individuals affiliated with GPB for material misrepresentations and omissions under the federal securities laws with respect to

funds managed by GPB.

At the present time, the Company continues to vigorously defend these actions and is not able to determine

the ultimate resolution of these matters.

Adverse judgments in these matters in the aggregate could materially and adversely affect the

Company and its financial condition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings