Calton & Associates, Inc.

Allegations: LATE REPORTING ON THE TRACE SYSTEM. Status: Final Sanction Detail: THE APPLICANT:CALTON & ASSOCIATES, INC. PAID A FINE OF $10,000 IN FULL ON 11/14/2005 CHECK#025064 AND HAD TO REVISE THE SUPERVISORY PROCEDURESCONCERNING TRACE REPORTING.THESE PROCEDURES GO INTO EFFECT ON 11/21/2005. Summary: OUR CLEARING FIRM SWS..FAILED TO REPORT OUR TRANSACTIONS IN A TIMELY MANNER DUE TO TECHNICAL DIFFICULTIES AND LATE REPORTING BY OUR TRADING DESK.

Allegations: CALTON & ASSOCIATES SOLD UNREGISTERED SECURITIES AND FAILED TO PROPERLY SUPERVISE AN AGENT. Status: Final Sanction Detail: CALTON & ASSOCIATES AGREED TO A STIPULATION AND CONSENT AGREEMENT AND TO PAY A $1,500. FEE FOR ADMINISTRATIVE COSTS. THE FEE WAS PAID IN FULL ON 12/24/1998 PAYABLE TO THE SECURITIES ANTI-FRAUD TRUST FUND. Summary: CALTON & ASSOCIATES, INC. SOLD REG-D SECURITIES TO TWO FLORIDA RESIDENTS. THESE SECURITIES WERE INITIALLY EXEMPT FROM FLORIDA REGISTRATION. AFTER OUR TWO SALES THE GENERAL PARTNERS APPARANTLY ACCEPTED MORE THAN 35 NON-ACCREDITED INVESTORS INTO THE PROGRAM. ALTHOUGH WE COULD NOT HAVE KNOWN IN ADVANCE THAT THIS WOULD OCCUR, FLORIDA ASKED US TO PAY A $1,500. FINE AND WE ACCEPTED. WE BELIEVE THE CASE # ON OUR U6 IS INCORRECT. PLEASE CALL BILL REILLY TO CONFIRM (850)410-9805

Allegations: BRANCH OFFICE FAILED TO SUBMIT SEMINAR ADVERTISING AND SALES LITERATURE FOR APPROVAL PRIOR TO USE. Status: Final Sanction Detail: FINE OF $5000. PAID IN FULL ON 1/14/2009 Summary: THE STATE OF FL CONDUCTED AN AUDIT ON ONE OF OUR BRANCHES AND FOUND AN ADVERTISING PIECE THAT WAS NOT SENT TO THE COMPLIANCE DEPARTMENT FOR APPROVAL. CALTON & ASSOCIATES HAD TO HIRE AN INDEPENDENT CONSULTANT TO REVIEW THE FIRM'S SUPERVISORY PROCEDURES AND TO IMPLEMENT ANY RECOMMENDATIONS THE INDEPENDENT CONSULTANTS HAD. CALTON & ASSOCIATES DID NOT ADMIT OR DENY THE FINDINGS BUT AGREED TO THE FINE AND CEASE AND DESIST AS WELL AS THE INDEPENDENT CONSULTANTS REVIEW.

Allegations: THE FLORIDA DEPARTMENT OF BANKING AND FINANCE ALLEGES THAT CALTON & ASSOCIATES, INC. CONDUCTED SECURITIES BUSINESS FROM A BRANCH OFFICE LOCATION IN FLORIDA WITHOUT BENEFIT OF LAWFUL REGISTRATION. Status: Final Sanction Detail: THE FINAL ORDER INCORPORATED THE STIPULATION AND CONSENT AGREEMENT DATED 05/05/1998 IN WHICH CALTON & ASSOCIATES NEITHER ADMITTED OR DENIED BUT CONSENTED TO THE ENTRY OF A FINDING BY THE DEPARTMENT THAT AN ASSOCIATED PERSON CONDUCTED A SECURITIES BUSINESS THROUGH AN UNREGISTERED BRANCH OFFICE. PURSUANT TO THE AGREEMENT, CALTON & ASSOCIATES AGREED TO CEASE AND DESIST ALL PRESENT AND FUTURE VIOLATIONS OF CHAPTER 517,F.S AND THE RULES PROMULGATED THEREUNDER AND TO PAY AN ADMINISTRATIVE FINE IN THE AMOUNT OF $5,000. THE DEPARTMENT AGREED TO APPROVE THE APPLICATIONS FILED BY CALTON & ASSOCIATES FOR REGISTRATION OF BRANCH OFFICES IN FLORIDA. Summary: AN ASSOCIATED PERSON PLACED AN AD IN THE YELLOW PAGES AND WAS NOT REGISTERED AS A BRANCH OFFICE. ORDER ISSUED ACCEPTING THE STIPULATION AND CONCENT AGREEMENT.

Allegations: FAILURE TO REASONABLY SUPERVISE A REPRESENTATIVE WITH THE VIEW OF PREVENTING VIOLATIONS OF THE ARIZONA SECURITIES ACT. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, CALTON & ASSOCIATES CONSENTED TO THE ENTRY OF AN ORDER THAT THE FIRM FAILED TO REASONABLY SUPERVISE A SALESMAN AND PAID A $5,000. PENALTY Summary: DENNIS RYAN WAS CUSTODIAN FOR HIS MINOR DAUGHTER'S ACCOUNT. THE STATE OF ARIZONA FELT HE INVESTED SOME OF THESE FUNDS IMPROPERLY.

Allegations: BREACH OF FIDUCIARY DUTY AND INADEQUATE DISCLOSURE IN CONNECTION WITH MUTUAL FUND SHARE CLASS SELECTION PRACTICES AND FEES RECEIVED UNDER RULE 12B-1 OF THE INVESTMENT COMPANY ACT OF 1940. CALTON FAILED TO ADEQUATELY DISCLOSE TO CLIENTS CONFLICTS OF INTEREST RELATING TO CALTON'S RECEIPT OF 12B-1 FEES AND/OR SELECTION OF MUTUAL FUND SHARE CLASSES THAT PAY SUCH FEES. DURING THE RELEVANT TIME PERIOD, CALTON CHARGED 12B-1 FEES WHEN LOWER COST SHARE CLASSES OF THOSE SAME FUNDS WERE AVAILABLE. DURING THE RELEVANT TIME PERIOD, CALTON RECEIVED 12B-1 FEES FOR ADVISING CLIENTS TO INVEST IN OR HOLD MUTUAL FUND SHARE CLASSES. Status: Final Sanction Detail: DISGORGEMENT AMOUNT: $278,157.85 PLUS PREJUDGMENT INTEREST OF $26,886.76 ($305,044.61 TOTAL) UNDERTAKINGS: CALTON WAS ORDERED TO REVIEW AND CORRECT (AS NECESSARY) ALL RELEVANT DISCLOSURE DOCUMENTS AND ALL POLICIES AND PROCEDURES CONCERNING MUTUAL FUND SHARE CLASS SELECTION AND 12B-1 FEES, AND NOTIFY AFFECTED INVESTORS OF THE SETTLEMENT TERMS OF THE SEC'S ORDER. Summary: CALTON SELF-REPORTED TO THE SEC PURSUANT TO THE SHARE CLASS SELECTION DISCLOSURE INITIATIVE. WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, CALTON CONSENTED TO AN ORDER. THE ORDER MADE FINDINGS AND IMPOSED REMEDIAL SANCTIONS. CALTON WAS CENSURED AND ORDERED TO: 1) CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTIONS 206(2) AND 207 OF THE INVESTMENT ADVISERS ACT OF 1940; 2 ) PAY DISGORGEMENT AND PREJUDGMENT INTEREST TO AFFECTED INVESTORS; 3) REVIEW AND CORRECT (AS NECESSARY) ALL RELEVANT DISCLOSURE DOCUMENTS AND ALL POLICIES AND PROCEDURES CONCERNING MUTUAL FUND SHARE CLASS SELECTION AND 12B-1 FEES; AND 4) NOTIFY AFFECTED INVESTORS OF THE SETTLEMENT TERMS OF THE ORDER. CALTON DEPOSITED THE FULL DISGORGEMENT AMOUNT PLUS PREJUDGMENT INTEREST IN ESCROW WITHIN 10 DAYS OF THE ORDER.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO REPORT TRANSACTIONS IN TRADE REPORTING AND COMPLIANCE ENGINE (TRACE)-ELIGIBLE SECURITIZED PRODUCTS TO TRACE WITHIN THE TIME REQUIRED BY FINRA RULE 6730(A). Status: Final Sanction Detail: THE FIRM WAS FINED $5,000.00