Hilltop Securities Inc.

Allegations: CONSPIRACY TO FIX PRICES AT WHICH INVESTORS BOUGHT AND SOLD GSE BONDS. Status: Pending Summary: STATE ALLEGES THAT THE FIRM FAILED TO MEET ITS DUTY OF CARE OBLIGATION TO AVOID RECOMMENDING INVESTMENTS WHICH IT NEW OR SHOULD HAVE KNOWN WOULD CONSTITUTE A FRAUD OR A SCAM.

Allegations: CONSPIRACY TO FIX PRICES AT WHICH INVESTORS BOUGHT AND SOLD GSE BONDS. Status: Final Summary: STATE ALLEGES THAT THE FIRM FAILED TO MEET ITS DUTY OF CARE OBLIGATION TO AVOID RECOMMENDING INVESTMENTS WHICH IT NEW OR SHOULD HAVE KNOWN WOULD CONSTITUTE A FRAUD OR A SCAM.

Allegations: VIOLATED EXCHANGE RULE 342 BY FAILING TO MAINTAIN APPROPRIATE PROCEDURES FOR SUPERVISION WITH RESPECT TO MAKING AND PRESERVING ACCURATE RECORDS DURING A SYSTEM CONVERSION, FLOOR BROKERAGE ACTIVITIES, AND COMPLIANCE WITH CONTINUING EDUCATION REQUIREMENTS; VIOLATED SEC RULES 17A-3 & 17A-4 AND EXCHANGE RULE 440 BY FAILING TO PRESERVE ACCURATE BOOKS AND RECORDS CONCERNING CUSTOMER ACCOUNTS AND CLEARANCE ACCOUNT RECONCILIATIONS DURING A SYSTEM CONVERSION; VIOLATED SEC RULE 15C3-1 BY FAILING TO PROPERLY COMPUTE NET CAPITAL; VIOLATED EXCHANGE RULES 123 AND 410 BY FAILING TO PRESERVE RECORDS OF FLOOR BROKERAGE ORDERS; VIOLATED EXCHANGE RULE 345A CONCERNING CONTINUING EDUCATION REQUIREMENTS. Status: Final Sanction Detail: CENSURE & $150,000 FINE. Summary: VIOLATED EXCHANGE RULE 342 BY FAILING TO MAINTAIN APPROPRIATE PROCEDURES FOR SUPERVISION WITH RESPECT TO MAKING AND PRESERVING ACCURATE RECORDS DURING A SYSTEM CONVERSION, FLOOR BROKERAGE ACTIVITIES, AND COMPLIANCE WITH CONTINUING EDUCATION REQUIREMENTS; VIOLATED SEC RULES 17A-3 AND 17A-4 AND EXCHANGE RULE 440 BY FAILING TO PRESERVE ACCURATE BOOKS AND RECORDS CONCERNING CUSTOMER ACCOUNTS AND CLEARANCE ACCOUNT RECONCILIATIONS DURING A SYSTEM CONVERSION; VIOLATED SEC RULE 15C3-1 BY FAILING TO PROPERLY COMPUTE NET CAPITAL; VIOLATED EXCHANGE RULES 123 & 410 BY FAILING TO PRESERVE RECORDS OF FLOOR BROKERAGE ORDERS; VIOLATED EXCHANGE RULE 345A CONCERNING CONTINUING EDUCATION REQUIREMENTS - CONSENT TO CENSURE & $150,000 FINE.

Allegations: NASD CONDUCT RULE 2110 - RESPONDENT MEMBER SOLD SHARES ISSUED BY MUTUAL FUNDS WITHOUT PROVIDING CERTAIN CUSTOMERS WITH THE REDUCTION IN THE FRONT-END LOADS, OR SALES CHARGES DESCRIBED IN THE PROSPECTUSES OF THE FUNDS; FAILED TO GIVE ITS CUSTOMERS BREAKPOINT DISCOUNTS IN 89.02% OF ELIGIBLE MUTUAL FUND TRANSACTIONS IN 2001 AND 2002, THAT RESULTED IN MISSED BREAKPOINTS THAT WOULD HAVE REDUCED CUSTOMERS CHARGES BY AT LEAST $36,971 ON THEIR PURCHASES OF MUTUAL FUND SHARES WITH FRONT-END LOADS DURING THE RELEVANT PERIOD. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SOUTHWEST SECURITIES, INC. CONSENTED TO THE FINDING OF THE ALLEGATIONS AND TO THE FOLLOWING SANCTIONS: CENSURED AND FINED $36,971, AND REQUIRED TO PROVIDE WRITTEN NOTIFICATION TO EACH CUSTOMER WHO PURCHASED FRONT-END LOAD MUTUAL FUNDS THROUGH THE FIRM FROM JANUARY 1, 1999 THROUGH 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 $2,500 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 PROGRAM BY 4/16/04; 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 IDENTIFYING 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. Summary: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SOUTHWEST SECURITIES, INC. CONSENTED TO THE FINDING OF THE ALLEGATIONS AND TO THE FOLLOWING SANCTIONS: CENSURED AND FINED $36,971, AND REQUIRED TO PROVIDE WRITTEN NOTIFICATION TO EACH CUSTOMER WHO PURCHASED FRONT-END LOAD MUTUAL FUNDS THROUGH THE FIRM FROM JANUARY 1, 1999 THROUGH 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 $2,500 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 PROGRAM BY 4/16/04; 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 IDENTIFYING 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: 9/24/04-STIPULATION & CONSENT TO PENALTY FILED BY NYSE DIVISION OF ENFORCEMENT CONSENTED TO FINDINGS:WITHOUT ADMITTING OR DENYING GUILT, SOUTHWEST SECURITIES CONSENTS TO FINDINGS BY THE HEARING PANEL THAT THE FIRM:1. VIOLATED EXCHANGE RULE 342 BY FAILING TO REASONABLY SUPERVISE ITS BUSINESS ACTIVITIES & TO ESTABLISH & MAINTAIN APPROPRIATE PROCEDURES FOR SUPERVISION & CONTROL WITH RESPECT TO ITS BUSINESS ACTIVITIES INVOLVING THE TRADING OF MUTUAL FUNDS. 2. VIOLATED SECTION 17A OF THE EXCHANGE ACT SEC RULES 17A-3 AND 17A-4 & EXCHANGE RULE 440 IN THAT IT FAILED TO MAKE & PRESERVE ACCURATE BOOKS & RECORDS REFLECTING ORDERS FOR MUTUAL FUND TRANSACTIONS BY ITS HEDGE FUND CUSTOMERS.3. VIOLATED SECTION 17(A) OF THE EXCHANGE ACT & SEC RULE 17A-4 & EXCHANGE RULE 440 BY FAILING TO PRESERVE FOR A PERIOD OF THREE YEARS &/OR PRESERVE IN AN EASILY ACCESSIBLE PLACE FOR TWO YEARS, RECORDS OF ELECTRONIC COMMUNICATIONS RELATING TO THE BUSINESS OF THE FIRM. 4. ENGAGED IN CONDUCT INCONSISTENT WITH JUST & EQUITABLE PRINCIPLES OF TRADE IN THAT THE FIRM THROUGH CERTAIN OF ITS BROKERS WITH RESPECT TO CERTAIN MUTUAL FUND TRANSACTIONS:A. PURCHASED, SOLD, OR REDEEMED SHARES OF MUTUAL FUNDS AT A PRICE WHICH WAS NOT BASED ON THE CURRENT NET ASSET VALUE OF SUCH SECURITY NEXT COMPUTED AFTER RECEIPT OF A TENDER OF SUCH SECURITY FOR REDEMPTION OR OF AN ORDER TO PURCHASE OR SELL SUCH SECURITY IN VIOLATION OF APPLICABLE REGULATORY REQUIREMENTS OF RULE 22C1 PROMULGATED UNDER THE INVESTMENT COMPANY ACT OF 1940; AND B. IMPROPERLY PURCHASED,SOLD OR REDEEMED SHARES OF MUTUAL FUNDS AFTER THE CLOSE OF THE MARKET AT THE SHARE PRICE PRIOR TO CLOSE, RATHER THAN AT THE NEXT DAY & #8217; S SHARE PRICE,TO THE DETRIMENT OF THE MUTUAL FUND COMPANIES AND THEIR SHAREHOLDERS.STIPULATED SANCTION:THE IMPOSITION BY THE EXCHANGE OF A PENALTY OF A CENSURE,A TOTAL PAYMENT IN THE AMOUNT OF $10,000,000 CONSISTING OF $8,000,000 AS A PENALTY AND $2,000,000 AS DISGORGEMENT AND PREJUDGMENT INTEREST AND AN APPROPRIATE UNDERTAKING. Status: Final Sanction Detail: **9/2004**EXCHANGE HEARING PANEL DECISION 04-154 DECISION: VIOLATED EXCHANGE RULE 342 BY FAILING TO REASONABLY SUPERVISE ITS BUSINESS ACTIVITIES, AND TO ESTABLISH AND MAINTAIN APPROPRIATE PROCEDURES FOR SUPERVISION AND CONTROL WITH RESPECT TO ITS BUSINESS ACTIVITIES INVOLVING THE TRADING OF MUTUAL FUNDS; VIOLATED SECTION 17(A) OF THE EXCHANGE ACT, SEC RULES 17A-3 & 17A-4 AND EXCHANGE RULE 440 IN THAT IT FAILED TO MAKE AND PRESERVE ACCURATE BOOKS AND RECORDS REFLECTING ORDERS FOR MUTUAL FUND TRANSACTIONS BY ITS HEDGE FUND CUSTOMERS; VIOLATED SECTION 17(A)OF THE EXCHANGE ACT AND SEC RULE 17A-4 AND EXCHANGE RULE 440 BY FAILING TO PRESERVE FOR A PERIOD OF THREE YEARS AND/OR PRESERVE IN AN EASILY ACCESSIBLE PLACE FOR TWO YEARS, RECORDS OF ELECTRONIC COMMUNICATIONS RELATING TO THE BUSINESS OF THE FIRM; ENGAGED IN CONDUCT INCONSISTENT WITH JUST AND EQUITABLE PRINCIPLES OF TRADE IN THAT THE FIRM, THROUGH CERTAIN OF ITS BROKERS WITH RESPECT TO CERTAIN MUTUAL FUND TRANSACTIONS: (A) PURCHASED, SOLD OR REDEEMED SHARES OF MUTUAL FUNDS AT A PRICE WHICH WAS NOT BASED ON THE CURRENT NET ASSET VALUE OF SUCH SECURITY NEXT COMPUTED AFTER RECEIPT OF A TENDER OF SUCH SECURITY FOR REDEMPTION OR OF AN ORDER TO PURCHASE OR SELL SUCH SECURITY, IN VIOLATION OF APPLICABLE REGULATOR REQUIREMENTS OF RULE 22(C)1 PROMULGATED UNDER THE INVESTMENT COMPANY ACT OF 1940; AND (B) IMPROPERLY PURCHASED, SOLD OR REDEEMED SHARES OF MUTUAL FUNDS AFTER THE CLOSE OF THE MARKET, AT THE SHARE PRICE PRIOR TO CLOSE, RATHER THAN AT THE NEXT DAYS SHARE PRICE, TO THE DETRIMENT OF THE MUTUAL FUND COMPANIES AND THEIR SHAREHOLDERS. CONSENT TO CENSURE, A TOTAL PAYMENT OF $10,000,000 AND AN UNDERTAKING. THIS DECISION IS FINAL. Summary: 1/14/05 - THE DECISION IS NOW FINAL AND EFFECTIVE IMMEDIATELY.

Allegations: **5/22/06** STIPULATION OF FACTS AND CONSENT TO PENALTY FILED BY NYSE REGULATION DIVISION OF ENFORCEMENT AND PENDING CONSENTED TO FINDINGS: 1. VIOLATED NYSE RULE 342(B) BY FAILING TO CONDUCT ANNUAL BRANCH OFFICE INSPECTIONS FOR ONE OR MORE BRANCH OFFICES OF THE MEMBER ORGANIZATION; 2. VIOLATED NYSE RULE 345(A) BY PERMITTING EMPLOYEES TO ENGAGE IN SECURITIES BUSINESS PRIOR TO THE EFFECTIVE DATES OF THEIR REGISTRATION WITH THE NYSE AS REPRESENTATIVES OF THE ORGANIZATION; 3. VIOLATED NYSE RULE 410 BY FAILING TO OBTAIN WRITTEN SUPERVISORY APPROVAL FOR ACCOUNT DESIGNATION CHANGES PRIOR TO EFFECTING SUCH CHANGES; 4. VIOLATED NYSE RULE 346(E) BY FAILING TO OBTAIN NYSE APPROVAL FOR DUAL EMPLOYMENT STATUS FOR ONE OR MORE SUPERVISORY EMPLOYEES; 5. VIOLATED NYSE RULE 351(D) BY FAILING TO ACCURATELY REPORT CUSTOMER COMPLAINTS TO THE NYSE AS REQUIRED UNDER NYSE RULES; AND, 6. VIOLATED NYSE RULES 342(A) AND (B) BY FAILING TO EXERCISE REASONABLE SUPERVISION AND CONTROL, INCLUDING A SEPARATE SYSTEM OF FOLLOW UP AND REVIEW, WITH RESPECT TO ENSURING THAT: (I) ALL BRANCH OFFICES WERE ANNUALLY INSPECTED, (II) TRADE CORRECTIONS WERE APPROVED IN WRITING PRIOR TO EFFECTING SUCH CHANGES; AND (III) THE FIRM OBTAINED NYSE APPROVAL FOR DUAL EMPLOYMENT OF CERTAIN SUPERVISORY PERSONNEL. CONSENTED TO SANCTION: CENSURE AND A $100,000 FINE. Status: Final Sanction Detail: **6/29/06** DECISION 06-132 ISSUED BY NYSE HEARING BOARD DECISION: VIOLATED NYSE RULE 342(B) BY FAILING TO CONDUCT ANNUAL BRANCH OFFICE INSPECTIONS FOR ONE OR MORE BRANCH OFFICES; VIOLATED NYSE RULE 345(A) BY PERMITTING EMPLOYEES TO ENGAGE IN SECURITIES BUSINESS PRIOR TO THE EFFECTIVE DATES OF THEIR REGISTRATION; VIOLATED NYSE RULE 410 BY FAILING TO OBTAIN WRITTEN SUPERVISORY APPROVAL FOR ACCOUNT DESIGNATION CHANGES PRIOR TO EFFECTING SUCH CHANGES; VIOLATED NYSE RULE 346(E) BY FAILING TO OBTAIN NYSE APPROVAL FOR DUAL EMPLOYMENT STATUS FOR ONE OR MORE SUPERVISORY EMPLOYEES; VIOLATED NYSE RULE 351(D) BY FAILING TO ACCURATELY REPORT CUSTOMER COMPLAINTS TO THE NYSE; AND VIOLATED NYSE RULES 342(A) AND (B) BY FAILING TO EXERCISE REASONABLE SUPERVISION AND CONTROL, INCLUDING A SEPARATE SYSTEM OF FOLLOW UP AND REVIEW, WITH RESPECT TO ENSURING THAT: (I) ALL BRANCH OFFICES WERE ANNUALLY INSPECTED, (II) TRADE CORRECTIONS WERE APPROVED IN WRITING PRIOR TO EFFECTING SUCH CHANGES; AND (III) THE FIRM OBTAINED NYSE APPROVAL FOR DUAL EMPLOYMENT OF CERTAIN SUPERVISORY PERSONNEL. SANCTION: THE HEARING BOARD IMPOSED THE SANCTION, CONSENTED TO BY SOUTHWEST SECURITIES, INC., OF A CENSURE AND A $100,000 FINE. Summary: **07/26/2006 THE DECISION IS NOW FINAL AND EFFECTIVE IMMEDIATELY.

Allegations: PRIOR TO ACQUISITION BY SOUTHWEST SECURITIES, INC., ML STERN AND CO. SOLD (BOUGHT) CORPORATE BONDS TO (FROM) CUSTOMERS AND FAILED TO SELL (BUY) SUCH BONDS AT A PRICE THAT WAS FAIR, TAKING INTO CONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKET CONDITIONS WITH RESPECT TO EACH BOND AT THE TIME OF THE TRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WAS ENTITLED TO A PROFIT. Status: Final Sanction Detail: ADMINITRATIVE FINE $12,500.00, RESTITUTION OF $1,846.50 PLUS INTEREST. Summary: PRIOR TO ACQUISITION BY SOUTHWEST SECURITIES, INC., ML STERN SOLD (BOUGHT) CORPORATE BONDS TO (FROM) CUSTOMERS AND FAILED TO SELL (BUY) SUCH BONDS AT A PRICE THAT WAS FAIR, TAKING INTO CONSIDERATION ALL RELEVANT CIRCUMSTANCES, INCLUDING MARKET CONDITIONS WITH RESPECT TO EACH BOND AT THE TIME OF THE TRANSACTION, THE EXPENSE INVOLVED AND THAT THE FIRM WAS ENTITLED TO A PROFIT.

Allegations: FINRA STAFF ALLEGES THAT ML STERN AND CO., (NOW KNOWN AS SOUTHWEST SECURITIES, INC.) PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROM A CUSTOMER AND/OR SOLD MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO A CUSTOMER AT AN AGGREGATE PRICE (INCLUDING ANY MARK-DOWN OR MARK-UP) THAT WAS NOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER, DEALER, OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER, OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL DOLLAR AMOUNT OF THE TRANSACTION. 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 IS CENSURED, FINED $38,000.00 FOR VIOLATIONS OF MSRB RULES AND REQUIRED TO PAY $19,655.36, PLUS INTEREST, IN RESTITUTION TO INVESTORS. A REGISTERED PRINCIPAL SHALL SUBMIT SATISFACTORY PROOF OF PAYMENT OF THE RESTITUTION, OR OF REASONABLE AND DOCUMENTED EFFORTS UNDERTAKEN TO EFFECT RESTITUTION TO FINRA NO LATER THAN 120 DAYS AFTER ACCEPTANCE OF THIS AWC. ANY UNDISTRIBUTED RESTITUTION AND INTEREST SHALL BE FORWARDED TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTY OR ABANDONED PROPERTY FUND FOR THE STATE IN WHICH THE CUSTOMER LAST RESIDED.

Allegations: ORDERS WERE PLACED BY A CORRELSPONDENT BROKER, S. C. COSTA COMPANY, WHICH WERE CROSSES, BUT A CHANGE OF OWNERSHIP WAS NOT ACCOMPLISHED. Status: Final Sanction Detail: PAID $10,000.00 FINE IN JANUARY, 1984 Summary: ORDERS WERE PLACE BY A CORRELSPONDENT BROKER, S. C. COSTA, WHICH WERE CROSSES, BUT A CHANGE OF OWNERSHIP WAS NOT ACCOMPLISHED

Allegations: INCONSISTENT PRINT Status: Final Sanction Detail: PAID $250 ON 01/06/85 Summary: PAID $250 ON 01/06/85

Allegations: VIOLATION OF MSRB RULE G-17. DID NOT INCLUDE ALL REPORTABLE CONTRIBUTIONS. Status: Final Sanction Detail: $2,000.00 FINE PAID 05/01/97 Summary: $2,000.00 FINE PAID 05/01/97

Allegations: FAILURE TO REPORT NASDAQ VOLUME Status: Final Sanction Detail: PAID $250.00 ON 07/06/88 Summary: PAID $250.00 ON 07/06/88

Allegations: VIOLATION OF MSRB RULE G-17. DID NOT INCLUDE ALL REPORTABLE CONTRIBUTIONS. Status: Final Sanction Detail: $2,000.00 FINE PAID 05/01/97 Summary: LETTER OF AWC. $2,000.00 FINE PAID 05/01/97

Allegations: VIOLATION OF MSRB RULE G-37/G-38 FOR FAILURE TO SUBMIT COMPLETE INFORMATION ON MUNICIPAL FINANCINGS. Status: Final Sanction Detail: $250.00 FINE PAID 09/18/96 Summary: THIS WAS A FAILURE TO INCLUDE ONE MUNICIPAL UNDERWRITING IN WHICH SWS SECURITIES ACTED AS MANAGER. WE HAVE SINCE PUT IN PLACE PROCEDURES TO PREVENT THIS FROM OCCURRING IN THE FUTURE.

Allegations: VIOLATIONS OF REGULATION 240.15C3-3 Status: Final Sanction Detail: SWS SECURITIES WAS FINED $60,000.00 AND DON BUCHHOLZ WAS CENSURED. Summary: SWS SECURITIES WAS FINED $60,000.00 AND DON BUCHHOLZ WAS CENSURED.

Allegations: MINOR RULE VIOLATION OF RULE 132.30. FAILURE TO SUBMIT AUDIT TRAIL DATA Status: Final Sanction Detail: PAID $2,500.00 FINE ON 06/28/89

Allegations: AS PART OF A GLOBAL SETTLEMENT BY SEVENTEEN BROKER-DEALERS, THE NASD INSTITUTED AND SETTLED DISCIPLINARY PROCEEDINGS AGAINST SEVEN BROKER-DEALERS, INCLUDING SWS SECURITIES, INC., ALLEGING UNLAWFUL, UNDISCLOSED OVERCHARGES IN CONNECTION WITH THE PRICING OF ESCROW SECURITIES SOLD TO CERTAIN MUNICIPAL BOND ISSUERS FOR USE IN ADVANCE REFUNDING TRANSACTIONS. Status: Final Sanction Detail: SWS SECURITIES, INC. AGREED TO PAY DISGORGEMENT TO AN ISSUER IN THE AMOUNT OF $61,298.94, AND TO THE U.S. TREASURY IN THE AMOUNT OF $473,992.30. THE ISSUER WAS PAID ON APRIL 19, 2000, AND THE U.S. TREASURY WAS PAID ON APRIL 13, 2000. Summary: SWS SECURITIES SIMULTANEOUSLY SETTLED AN ACTION THAT HAD BEEN BROUGHT UNDER THE FALSE CLAIMS ACT. THIS ACTION IS ALSO RELATED TO THE MARK-UPS CHARGED ON ESCROW SECURITIES SOLD TO CERTAIN MUNICIPAL BOND ISSUERS.

Allegations: HILLTOP FAILED TO ESTABLISH PROCEDURES REASONABLY DESIGNED TO ASSURE THAT CUSTOMERS RECEIVED THE INITIAL MARGIN INTEREST RATE DISCLOSURES AND FAILED TO ESTABLISH, MAINTAIN, AND ENFORCE A SUPERVISORY SYSTEM, INCLUDING WRITTEN SUPERVISORY PROCEDURES, REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RULE 10B-16(A)(1). Status: Final Sanction Detail: CENSURE AND MONETARY FINE OF $250,000 Summary: THE FIRM WAS CENSURED, FINED $250,000 AND REQUIRED TO SUBMIT TO FINRA A WRITTEN CERTIFICATION THAT IT HAS COMPLETED A REVIEW OF ITS SYSTEMS AND PROCEDURES AND AS OF THE DATE OF THE CERTIFICATION, THE FIRM'S POLICIES, SYSTEMS AND PROCEDURES ARE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE.

Allegations: CUMLATIVE NASD FINDINGS W/ REGARD TO ALLEGED VIOLATIONS ARISING FROM THE FOLLOWING EXAMINATIONS & REVIEWS: 1)1998 TMMS EXAM 2)1999 TMMS EXAM 3)FIRM QUOTE REVIEW 4)LOCKED & CROSSED 5)SECOND LOCKED & CROSSED. Status: Final Sanction Detail: $39000.00 PAID 7/24/2001 Summary: SWS SECURITIES SUBMITTED A LETTER OF AWC IN WHICH THE FIRM WAS CENSURED AND FINED $39000. W/O ADMITTING OR DENYING THE ALLEGATIONS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS THAT, IN TRANSACTIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MKT AND FAILED TO BUY OR SELL IN SUCH MKT SO THAT THE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLE.

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 COMMISSIONS) 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 FILED 12/20/1994 BY DISTRICT NO. 6 AGAINST BROKERS TRANSACTION SERVICE, INC. (THE FIRM) AND ROSSI LAMONT WALTER ALLEGING VIOLATIONS OF ARTICLE III, SECTIONS 1 AND 27 OF 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. C069400050 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 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.

Allegations: TRANSACTIONS WITH WISCONSIN RESIDENTS PRIOR TO REGISTRATION Status: Final Sanction Detail: DENIED REGISTRATION IN WISCONSIN FOR 120 DAYS BEGINNING 2/08/83 Summary: DENIED REGISTRATION IN WISCONSIN FOR 120 DAYS BEGINNING 2/08/83

Allegations: TRANSACTIONS IN THE STATE PRIOR TO REGISTRATION. Status: Final Sanction Detail: $5,450.00 FINE PAID 09/22/89 Summary: $5,450.00 FINE PAID 09/22/89

Allegations: NOT FILING FORM BD AMENDMENTS DIRECTLY WITH THE STATE Status: Final Sanction Detail: PAID $2,500.00

Allegations: TRANSACTIONS WITH IOWA RESIDENTS PRIOR TO REGISTRATION Status: Final Sanction Detail: PAID $1,000.00

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO ESTABLISH AND IMPLEMENT AN AML COMPLIANCE PROGRAM REASONABLY DESIGNED TO DETECT AND REPORT SUSPICIOUS TRADING ACTIVITY IN LOW-PRICED SECURITIES. THE FINDINGS STATED THAT CUSTOMERS INTRODUCED TO THE FIRM TRADED AT LEAST 2.07 BILLION SHARES OF LOW-PRICED SECURITIES, VALUED AT APPROXIMATELY $221 MILLION. THESE SHARES WERE NOT SUBJECT TO A REASONABLE REVIEW TO DETECT AND INVESTIGATE RED FLAGS OF SUSPICIOUS ACTIVITY FOR PURPOSES OF DETERMINING WHETHER TO FILE A SAR. THE FIRM FAILED TO FOLLOW THE DEPARTMENT OF TREASURY'S STANDARD FOR DETERMINING WHETHER TO FILE A SAR, REQUIRING PROOF OF ACTUAL FRAUD AS OPPOSED TO SUSPICION THAT A TRANSACTION INVOLVED UNLAWFUL ACTIVITY OR LACKED AN APPARENT LAWFUL PURPOSE. THE FIRM FAILED TO IMPLEMENT ITS AML PROCEDURES REQUIRING THE COLLECTION AND COMPLETION OF DEPOSIT REVIEW FORMS IN CONNECTION WITH THE DEPOSIT OF LOW-PRICED SECURITIES, RESULTING IN MISSED RED FLAGS OF POTENTIALLY SUSPICIOUS ACTIVITY. THE FIRM'S AML COMPLIANCE PROGRAM FAILED TO REASONABLY DETECT AND REPORT SUSPICIOUS TRADING ACTIVITY, IN PART, BECAUSE IT FAILED TO DEVOTE ADEQUATE RESOURCES TO ITS AML PROGRAM. THE FIRM'S AML ANALYSTS WERE TASKED WITH REVIEWING A REPORT THAT DID NOT PROVIDE FOR A REASONABLE AML REVIEW. DUE TO DEFICIENCIES IN THE REPORT, THE ANALYSTS DID NOT USE RISK-BASED FACTORS TO CHOOSE TRANSACTIONS FOR REVIEW AND, BASED ON SAMPLE REVIEWED BY THE STAFF, WERE ONLY ABLE TO REVIEW APPROXIMATELY 20% OF THE TRANSACTIONS, THESE 20% WERE NOT THE HIGHEST RISK TRANSACTIONS AT THE FIRM. THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO SUBMIT FORM G-32 INFORMATION TO EMMA IN CONNECTION WITH PRIMARY OFFERINGS OF MUNICIPAL SECURITIES THAT THE FIRM SERVED AS PLACEMENT AGENT FOR. THE FIRM ALSO MADE FORM G-32 FILINGS TO EMMA THAT WERE BETWEEN 1 AND 3 DAYS LATE. SUCH CONDUCT VIOLATED MSRB RULE G-32. FURTHERMORE, THE FIRM FAILED TO PROVIDE REQUIRED MSRB RULE G-17 DISCLOSURE LETTERS TO ISSUERS IN CONNECTION WITH OFFERINGS PLUS ONE OTHER OFFERING, IN VIOLATION OF MSRB RULE G-17. THE FIRM DISCOVERED THESE FAILURES AND IT TRAINED EMPLOYEES DURING ITS ACQUISITION AND SELF-REPORTED THEM TO FINRA. FINALLY, THE FIRM FAILED TO REPORT ON FORM G-37 THAT IT HAD CONDUCTED MUNICIPAL SECURITIES BUSINESS WITH THE ISSUERS BY ACTING AS A PLACEMENT AGENT IN CONNECTION WITH THE ISSUERS' MUNICIPAL SECURITIES OFFERINGS. AS A RESULT OF THIS CONDUCT, THE FIRM VIOLATED MSRB RULE G-37. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $475,000 AND REQUIRED TO RETAIN ONE OR MORE QUALIFIED INDEPENDENT CONSULTANTS, WITHIN 120 DAYS, TO CONDUCT A COMPREHENSIVE REVIEW OF THE REASONABLENESS OF ITS POLICIES, SYSTEMS AND PROCEDURES (WRITTEN AND OTHERWISE) AND TRAINING RELATING TO COMPLIANCE WITH FINRA RULE 3310 AND THE REQUIREMENTS OF THE BANK SECRECY ACT, 31 USC §5311, ET. SEQ., AND THE REGULATIONS PROMULGATED THEREUNDER.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FORM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO DELIVER EXCHANGE TRADED FUND (ETF) PROSPECTUSES TO ITS OWN CUSTOMERS AT THE TIME OF DELIVERY OF THE SECURITY IN CONTRAVENTION OF SECTION 5 OF THE SECURITIES ACT OF 1933. THE FINDINGS STATED THAT THE FIRM FAILED TO ESTABLISH, MAINTAIN AND ENFORCE AN ADEQUATE SUPERVISORY SYSTEM AND WSPS TO ENSURE THAT CUSTOMERS WHO PURCHASED CERTAIN INVESTMENT PRODUCTIONS WERE RECEIVING A REQUIRED PROSPECTUS. THE FINDINGS ALSO STATED THAT THE FIRM DELAYED NOTIFICATION OF ITS PROSPECTUS DELIVER FAILURES TO THE CORRESPONDENT FIRM AFFECTED BY THE FAILURES. Status: Final Sanction Detail: THE FIRM WAS CENSURED AND FINED $450,000.00

Allegations: INCOMPLETE RESPONSE TO SUBPOENA ISSUED BY THE DEPARTMENT. Status: Final Sanction Detail: CONSENT ORDER Summary: NOTICE OF HEARING WAS ISSUED MAY 7, 2012. THE HEARING IS SCHEDULED FOR JULY 18, 2012. CONTACT 785-4947. CONSENT ORDER WAS ISSUED NOVEMBER 19, 2012. CONTACT 785-4947

Allegations: SEC ADMIN RELEASES 33-10023; 34-77025; FEBRUARY 2, 2016: THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED AGAINST HILLTOP SECURITIES INC., FORMERLY, SOUTHWEST SECURITIES, INC. ("RESPONDENT"). RESPONDENT WILLFULLY VIOLATED SECTION 17(A)(2) OF THE SECURITIES ACT. THIS MATTER INVOLVES VIOLATIONS OF AN ANTIFRAUD PROVISION OF THE FEDERAL SECURITIES LAWS IN CONNECTION WITH RESPONDENT'S UNDERWRITING OF CERTAIN MUNICIPAL SECURITIES OFFERINGS. RESPONDENT, A REGISTERED BROKER-DEALER, CONDUCTED INADEQUATE DUE DILIGENCE IN CERTAIN OFFERINGS AND AS A RESULT, FAILED TO FORM A REASONABLE BASIS FOR BELIEVING THE TRUTHFULNESS OF CERTAIN MATERIAL REPRESENTATIONS IN OFFICIAL STATEMENTS ISSUED IN CONNECTION WITH THOSE OFFERINGS. THIS RESULTED IN RESPONDENT OFFERING AND SELLING MUNICIPAL SECURITIES ON THE BASIS OF MATERIALLY MISLEADING DISCLOSURE DOCUMENTS. THE VIOLATIONS WERE SELF-REPORTED BY RESPONDENT TO THE COMMISSION PURSUANT TO THE DIVISION OF ENFORCEMENT'S (THE "DIVISION") MUNICIPALITIES CONTINUING DISCLOSURE COOPERATION (MCDC) INITIATIVE. Status: Final Sanction Detail: THE RESPONDENT SHALL CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 17(A)(2)OF THE SECURITIES ACT, PAY A CIVIL MONEY PENALTY IN THE AMOUNT OF $360,000 AND COMPLY WITH THE UNDERTAKINGS ENUMERATED IN THE OFFER OF SETTLEMENT. Summary: HILLTOP SECURITIES, ALONG WITH A NUMBER OF OTHER MUNICIPAL SECURITIES UNDERWRITERS AND ISSUERS, VOLUNTARILY PARTICIPATED IN THE SEC'S MUNICIPAL CONTINUING DISLCOUSRE COOPERATION (MCDC) INITATIVE. AS PART OF THE INITATIVE, UNDERWRITERS AND ISSUERS OF OFFERINGS IN WHICH THE FINAL OFFICIAL STATEMENT CONTAINED MATERIALLY INACCURATE STATEMENTS REGARDING AN ISSUERS PRIOR COMPLIANCE WITH CONTINUING DISCLOSURE OBLIGATIONS WERE GIVEN AN OPPORTUNITY TO SELF REPORT THESE INACCURACIES TO THE SEC. THE SECURITIES AND EXCHANGE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE, AND HEREBY ARE, INSTITUTED AGAINST HILLTOP SECURITIES INC., FORMERLY, SOUTHWEST SECURITIES, INC. ("RESPONDENT"). RESPONDENT WILLFULLY VIOLATED SECTION 17(A)(2) OF THE SECURITIES ACT. THIS MATTER INVOLVES VIOLATIONS OF AN ANTIFRAUD PROVISION OF THE FEDERAL SECURITIES LAWS IN CONNECTION WITH RESPONDENT'S UNDERWRITING OF CERTAIN MUNICIPAL SECURITIES OFFERINGS. RESPONDENT, A REGISTERED BROKER-DEALER, CONDUCTED INADEQUATE DUE DILIGENCE IN CERTAIN OFFERINGS AND AS A RESULT, FAILED TO FORM A REASONABLE BASIS FOR BELIEVING THE TRUTHFULNESS OF CERTAIN MATERIAL REPRESENTATIONS IN OFFICIAL STATEMENTS ISSUED IN CONNECTION WITH THOSE OFFERINGS. THIS RESULTED IN RESPONDENT OFFERING AND SELLING MUNICIPAL SECURITIES ON THE BASIS OF MATERIALLY MISLEADING DISCLOSURE DOCUMENTS. THE VIOLATIONS WERE SELF-REPORTED BY RESPONDENT TO THE COMMISSION PURSUANT TO THE DIVISION OF ENFORCEMENT'S (THE "DIVISION") MUNICIPALITIES CONTINUING DISCLOSURE COOPERATION (MCDC) INITIATIVE.

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 INC. AND ITS AFFILIATE, HILLTOP SECURITIES INDEPENDENT NETWORK 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 THIER 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. RESPONDENTS 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. RESPONDENT IS 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 HAVE 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.

Allegations: IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS STATED BY STAFF OF THE SEC, SOLICITOR HEREBY MAKES THE FOLLOWIN DISCLOSURE: EFFECTIVE ON 1/06/2005, SOLICITOR ENTERED INTO AN OFFER OF SETTLEMENT WITH THE SEC PURSUANT TO WHICH SOLICITOR SETTLED ADMINISTRATIVE PROCEEDINGS BROUGHT BY THE SEC. IN THAT SETTLEMENT,AND WITHOUT ADMITTING OR DENYING THE FINDINGS CONTAINED IN THE SEC'S ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS, SOLICITOR CONSENTED TO SEC FINDINGS THAT SOLICITOR FAILED REASONABLY TO SUPERVISE THREE FORMER BROKERS ENGAGED IN LATE TRADING AND MARKET TIMING OF MUTUAL FUNDS, THAT SOLICITOR ALLOWED MUTUAL FUND TRADES RECEIVED AFTER 4:00 P.M. TO BE PROCESSED AT THAT DAY'S PRICE AND THAT THE SOLICITOR FAILED TO MAINTAIN AND PRESERVE CERTAIN BOOKS AND RECORDS. SOLICITOR AGREED TO A CENSURE, DISGORGEMENT OF $2,000,000. AND A CIVIL MONEY PENALYT OF $8,000,000. Status: Final Sanction Detail: CEASE AND DESIST, CENSURE, DISGORGEMENT & MONETARY FINE. Summary: IN ORDER TO COMPLY WITH CERTAIN REQUIREMENTS STATED BY STAFF OF THE SEC, SOLICITOR HEREBY MAKES THE FOLLOWING DISCLOSURE: EFFECTIVE ON 1/06/2005, SOLICITOR ENTERED INTO AN OFFER OF SETTLEMENT WITH THE SEC PURSUANT TO WHICH SOLICITOR SETTLED ADMINISTRATIVE PROCEEDINGS BROUGHT BY THE SEC. IN THAT SETTLEMENT, AND WITHOUT ADMITTING OR DENYING THE FINDINGS CONTAINED IN THE SEC'S ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS, SOLICITOR CONSENTED TO SEC FINDINGS THAT SOLICITOR FAILED REASONABLY TO SUPERVISE THREE FORMER BROKERS ENGAGED IN LATE TRADING AND MARKET TIMING OF MUTUAL FUNDS, THAT SOLICITOR ALLOWED MUTUAL FUND TRADES RECEIVED AFTER 4:00 P.M. TO BE PROCESSED AT THAT DAY'S PRICE AND THAT THE SOLICITOR FAILED TO MAINTAIN AND PRESERVE CERTAIN BOOKS AND RECORDS. SOLICITOR AGREED TO A CENSURE, DISGORGEMENT OF $2,000,000. AND A CIVIL MONEY PENALTY OF $8,000,000.

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: 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: THE SECURITIES AND EXCHANGE COMMISSION ("SEC") ENTERED A SETTLED ORDER FINDING THAT HILLTOP SECURITIES INC. ("HILLTOP") FAILED TO (1) MAINTAIN AND PRESERVE OFF-CHANNEL COMMUNICATIONS RELATED TO HILLTOP'S BROKER-DEALER BUSINESS, IN WILLFUL VIOLATION OF SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AND RULE 17A-4(B)(4) THEREUNDER, AS WELL AS RELATED TO RECOMMENDATIONS MADE OR PROPOSED TO BE MADE AND ADVICE GIVEN OR PROPOSED TO BE GIVEN WITH RESPECT TO HILLTOP'S INVESTMENT ADVISORY BUSINESS, IN WILLFUL VIOLATION OF SECTION 204 OF THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT") AND RULE 204-2(A)(7) THEREUNDER; AND (2) REASONABLY SUPERVISE ITS PERSONNEL WITH A VIEW TO PREVENTING OR DETECTING CERTAIN OF ITS PERSONNEL'S AIDING AND ABETTING VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER, WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT, AND SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER, WITHIN THE MEANING OF SECTION 203(E)(6) OF THE ADVISERS ACT. Status: Final Sanction Detail: HILLTOP ADMITTED TO THE FACTS IN THE SETTLEMENT ORDER, ACKNOWLEDGED ITS CONDUCT VIOLATED THE FEDERAL SECURITIES LAWS, AND AGREED TO: (A) CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS OR ANY FUTURE VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER AND SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER, (B) BE CENSURED, (C) PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF $1,600,000, AND (D) COMPLY WITH CERTAIN UNDERTAKINGS RELATED TO THE RETENTION OF ELECTRONIC COMMUNICATIONS. THE CIVIL MONETARY PENALTY WILL BE PAID IN ACCORDANCE WITH THE TERMS OF THE SETTLEMENT ORDER. Summary: ON AUGUST 14, 2024, THE SEC ENTERED INTO A SETTLEMENT ORDER WITH HILLTOP TO SETTLE AN ADMINISTRATIVE ACTION FINDING THAT HILLTOP FAILED TO (1) MAINTAIN AND PRESERVE OFF-CHANNEL COMMUNICATIONS RELATED TO HILLTOP'S BROKER-DEALER BUSINESS, IN WILLFUL VIOLATION OF SECTION 17(A) OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AND RULE 17A-4(B)(4) THEREUNDER, AS WELL AS RELATED TO RECOMMENDATIONS MADE OR PROPOSED TO BE MADE AND ADVICE GIVEN OR PROPOSED TO BE GIVEN WITH RESPECT TO HILLTOP'S INVESTMENT ADVISORY BUSINESS, IN WILLFUL VIOLATION OF SECTION 204 OF THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT") AND RULE 204-2(A)(7) THEREUNDER; AND (2) REASONABLY SUPERVISE ITS PERSONNEL WITH A VIEW TO PREVENTING OR DETECTING CERTAIN OF ITS PERSONNEL' AIDING AND ABETTING VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER, WITHIN THE MEANING OF SECTION 15(B)(4)(E) OF THE EXCHANGE ACT, AND SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER, WITHIN THE MEANING OF SECTION 203(E)(6) OF THE ADVISERS ACT. HILLTOP ADMITTED TO THE FACTS IN THE SETTLEMENT ORDER, ACKNOWLEDGED ITS CONDUCT VIOLATED THE FEDERAL SECURITIES LAWS, AND AGREED TO: (A) CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS OR ANY FUTURE VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULE 17A-4(B)(4) THEREUNDER AND SECTION 204 OF THE ADVISERS ACT AND RULE 204-2(A)(7) THEREUNDER, (B) BE CENSURED, (C) PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF $1,600,000, AND (D) COMPLY WITH CERTAIN UNDERTAKINGS RELATED TO THE RETENTION OF ELECTRONIC COMMUNICATIONS. THE CIVIL MONETARY PENALTY WILL BE PAID IN ACCORDANCE WITH THE TERMS OF THE SETTLEMENT ORDER.

Allegations: NASD RULE 2110, NASD MARKETPLACE RULE 6240(A)(2) - WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE RESPONDENT MEMBER CONSENTED TO THE ENTRY OF FINDINGS THAT IT FAILED TO REPORT TO THE FIXED INCOME PRICING SYSTEM TRANSACTIONS IN FIPS SECURITIES WITHIN FIVE MINUTES AFTER EXECUTION. Status: Final Sanction Detail: FINED $5,000.

Allegations: NASD RULE 4613(E)(1)(C) - WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, THE RESPONDENT CONSENTED TO THE ENTRY OF FINDINGS THAT IT, A MARKET MARKER IN SECURITIES, LOCKED/CROSSED MARKET DURING THE PRE-OPENING MARKET PERIOD AND FAILED TO IMMEDIATELY THEREAFTER SEND A TRADE-OR-MOVE MESSAGE THROUGH SELECTNET TO THE MARKET PARTICIPANT WHOSE QUOTE IT LOCKED OR CROSSED THAT WAS PRICED AT THE RECEIVING MARKET PARTICIPANT'S QUOTED PRICE; AND/OR FAILED TO SEND A TRADE-OR-MOVE MESSAGE(S) THROUGH SELECTNET WITH AN AGGREGATE SIZE OF AT LEAST 5,000 SHARES TO ALL MARKET PARTICIPANTS WHOSE QUOTES IT LOCKED/CROSSED. ACTIVITY PERIOD 11/2000 - 12/2000. Status: Final Sanction Detail: A CENSURE AND A FINE OF $10,000.

Allegations: NASD RULES 2110 AND 3010(B) - WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, RESPONDENT MEMBER CONSENTED TO THE ENTRY OF FINDINGS THAT IT FAILED TO ENFORCE WRITTEN SUPERVISORY PROCEDURES ADDRESSING THE HANDLING, APPROVAL AND PROCESSING OF CUSTOMER LETTERS OF AUTHORIZATION RECEIVED FROM ITS CORRESPONDENT FIRMS PARTICIPATING IN DAY TRADING ACTIVITIES; RESPONDENT FAILED TO REFLECT IN ITS WRITTEN SUPERVISORY PROCEDURES, ITS PROCEDURES TO ADDRESS THE SETTING OF TRADING PARAMETERS FOR CORRESPONDENT FIRMS AND THE MONITORING OF CORRESPONDENT TRANSACTIONS AWAY FROM RESPONDENT. Status: Final Sanction Detail: CENSURE AND $25,000 FINE.

Allegations: NASD CONDUCT RULES 2110 AND 2320 - RESPONDENT MEMBER FAILED, IN TRANSACTIONS FOR OR WITH A CUSTOMER, TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICE TO ITS CUSTOMER WAS AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS,RESPONDENT MEMBER CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS;THEREFORE,THE FIRM IS CENSURED,FINED $10,000,AND RESTITUTION IN THE TOTAL AMOUNT OF $356.95, PLUS INTEREST. SATISFACTORY PROOF OF PAYMENT OF THE RESTITUTION OR OF REASONABLE AND DOCUMENTED EFFORTS UNDERTAKEN TO EFFECT RESTITUTION SHALL BE PROVIDED TO NASD NO LATER THAN 120 DAYS AFTER ACCEPTANCE OF THIS AWC. IF FOR ANY REASON RESPONDENT CANNOT LOCATE ANY CUSTOMER AFTER REASONABLE AND DOCUMENTED EFFORTS WITHIN SUCH PERIOD, OR SUCH ADDITIONAL PERIOD AGREED TO NASD, RESPONDENT SHALL FORWARD ANY UNDISTRIBUTED RESTITUTION AND INTEREST TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTY, OR ABANDONED PROPERTY FUND FOR ONE OF THE STATES IN WHICH THE CUSTOMER LAST RESIDED.

Allegations: RESPONDENT FAILED TO REPORT TO TRACE IN A TIMELY MANNER, RESPONDENT FAILED TO REPORT TO TRACE THE CORRECT EXECUTION TIMES, AND RESPONDENT DOUBLE REPORTED TO TRACE DURING THE PERIOD OF AUGUST 1,2002 THROUGH SEPTEMBER 30, 2002. Status: Final Sanction Detail: A CENSURE AND FINE OF $10000.00 Summary: RESPONDENT FAILED TO REPORT TO TRACE IN A TIMELY MANNER, RESPONDENT FAILED TO REPORT TO TRACE THE CORRECT EXECUTION TIMES AND RESPONDENT DOUBLE REPORTED TO TRACE DURING THE PERIOD OF AUGUST 1, 2002 THROUGH SEPTEMBER 30, 2002.

Allegations: NASD CONDUCT RULES 2110 AND 3010, NASD MARKETPLACE RULE 5220(E); RESPONDENT MEMBER REGISTERED AS AN INTERMARKET TRADING SYSTEM/COMPUTER ASSISTED EXECUTION SYSTEM ("ITS/CAES") MARKET MAKER FAILED TO MAINTAIN CONTINUOUS TWO-SIDED QUOTATIONS IN THE ABSENCE OF A GRANT OF EXCUSED WITHDRAWAL OR A FUNCTIONAL EXCUSED WITHDRAWAL BY NASD; ITS SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TO THE APPLICABLE SECURITIES LAWS AND REGULATIONS CONCERNING THE MAINTENANCE OF CONTINUOUS TWO-SIDED QUOTATIONS IN ITS/CAES. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, RESPONDENT FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE, FIRM IS CENSURED AND FINED $10,000.

Allegations: **9/28/05**STIPULATION AND CONSENT TO PENALTY FILED BY NYSE DIVISION OF ENFORCEMENT AND PENDING CONSENTED TO FINDINGS: 1.VIOLATED EXCHANGE RULE 410A BY FAILING TO SUBMIT ACCURATE TRADING INFORMATION THROUGH THE SUBMISSION OF ELECTRONIC BLUE SHEETS IN RESPONSE TO ONE OR MORE REQUESTS FOR SUCH INFORMATION BY THE EXCHANGE;2.VIOLATED EXCHANGE RULE 401 BY FAILING TO ADHERE TO THE PRINCIPLES OF GOOD BUSINESS PRACTICE IN THE CONDUCT OF THEIR BUSINESS AFFAIRS IN THAT IT SUBMITTED INACCURATE TRADING INFORMATION ON ELECTRONIC BLUE SHEETS IN RESPONSE TO ONE OR MORE REQUESTS FOR SUCH INFORMATION BY THE EXCHANGE; AND 3.VIOLATED EXCHANGE RULES 342 BY FAILING TO ESTABLISH AND MAINTAIN APPROPRIATE SYSTEMS AND PROCEDURES FOR THE SUPERVISION AND CONTROL OF AREAS RESPONSIBLE FOR COMPLYING WITH ELECTRONIC BLUE SHEET REPORTING REQUIREMENTS, AND FAILED TO ESTABLISH A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW TO REASONABLY ENSURE COMPLIANCE WITH EXCHANGE RULES RELATING TO THE PREPARATION AND SUBMISSION OF ELECTRONIC BLUE SHEETS. STIPULATED SANCTION:THE IMPOSITION BY THE EXCHANGE OF A CENSURE, A $300,000 FINE AND A REQUIREMENT THAT RESPONDENT WILL CONDUCT A VALIDATION OF ALL REQUIRED BLUE SHEET DATA ELEMENTS IN ACCORDANCE WITH ISG REGULATORY MEMORANDUM, ISG 2005-01. Status: Final Sanction Detail: **1/5/06** DECISION 05-157 ISSUED BY NYSE HEARING PANEL DECISION: VIOLATED NYSE RULE 410A BY FAILING TO SUBMIT ACCURATE TRADING INFORMATION THROUGH THE SUBMISSION OF ELECTRONIC BLUE SHEETS; VIOLATED NYSE RULE 401 BY SUBMITTING INACCURATE TRADING INFORMATION ON ELECTRONIC BLUE SHEETS; VIOLATED NYSE RULE 342 BY FAILING TO ESTABLISH AND MAINTAIN APPROPRIATE SYSTEMS AND PROCEDURES FOR THE SUPERVISION AND CONTROL OF AREAS RESPONSIBLE FOR COMPLYING WITH ELECTRONIC BLUE SHEET REPORTING REQUIREMENTS AND FAILING TO ESTABLISH A SEPARATE SYSTEM OF FOLLOW-UP AND REVIEW TO REASONABLY ENSURE COMPLIANCE WITH NYSE RULES RELATING TO THE PREPARATION AND SUBMISSION OF ELECTRONIC BLUE SHEETS. -CONSENT TO CENSURE, FINE OF $300,000, AND A REQUIREMENT TO CONDUCT VALIDATION OF ALL REQUIRED BLUE SHEET DATA ELEMENTS, AND UNDERTAKING TO INFORM NYSE IN WRITING THAT VALIDATION HAS BEEN COMPLETED.

Allegations: SEC RULE 11AC1-6, NASD RULES 1021, 2110, 3010, 5262, 6955(A) - SOUTHWEST SECURITIES, INC. FAILED TO PROPERLY REGISTER THE FIRM'S DIRECTOR OF REGULATORY OVERSIGHT WITH SUPERVISORY RESPONSIBILITY AS A GENERAL SECURITIES PRINCIPAL; FAILED TO PROPERLY REGISTER THE FIRM'S HEAD TRADER WITH SUPERVISORY RESPONSIBILITY AS A GENERAL SECURITIES PRINCIPAL; THE PERSONNEL AT THE FIRM DESIGNATED AS BEING RESPONSIBLE FOR THE ESTABLISHMENT, MAINTENANCE AND ENFORCEMENT OF THE FIRM'S SUPERVISORY SYSTEM AND WRITTEN SUPERVISORY PROCEDURES WITH RESPECT TO COMPLIANCE WITH APPPLICABLE SECURITIES LAWS, REGULATIONS, AND NASD RULES CONCERNING REGISTRATION FAILED TO DETECT THAT INDIVIDUALS WERE NOT PROPERLY REGISTERED AS GENERAL SECURITIES PRINCIPALS AND THUS FAILED TO COMPLY WITH APPLICABLE REQUIREMENTS FOR REGISTRATION; THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DEISGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND NASD RULES REGARDING SEC RULE 11AC1-1, RISKLESS PRINCIPAL TRADE REPORTING, SEC RULE 11AC1-5, AND OATS. THE FIRM SUBMITTED QUARTERLY ORDER ROUTING INFORMATION REPORTS THAT INCORRECTLY DISCLOSED AN "UNSPECIFIED ROUTE VENUE" TO WHICH THE FIRM'S ORDERS WERE ROUTED; FAILED TO SUBMIT TO OATS ANY ROUTE REPORTS RELATED TO CANCEL/REPLACE REPORTS THAT WERE REQUIRED TO BE SUBMITTED. THE FIRM, AN ITS/CAES MARKET MAKER, PURCHASED OR SOLD ITS/CASES SECURITIES WHETHER IN A PRINCIPAL CAPACITY OR AS AGENT, AT A PRICE THAT WAS LOWER THAN THE BID OR HIGHER THAN THE OFFER DISPLAYED FROM AN ITS PARTICIPANT EXCHANGE OR ITS/CAES MARKET MAKER. THE FIRM FAILED TO REPORT TO TRACE TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES EXECUTED ON A BUSINESS DAY DURING TRACE SYSTEM HOURS WITHIN 45 MINUTES OF THE TIME OF EXECUTION; AND THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND NASD RULES CONCERNING TRACE TRADE-REPORTING. 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 IS CENSURED, FINED $30,000, JOINTLY AND SEVERALLY, FINED $130,000 SOLELY, AND REQUIRED TO REVISE THE FIRM'S WRITTEN SUPERVISORY PROCEDURES WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC WITH RESPECT TO REGISTRATION REQUIREMENTS, SEC RULES 11AC1-1, 11AC1-5, RISKLESS PRINCIPAL TRADE REPORTING, OATS, AND TRACE TRADE-REPORTING.

Allegations: ALLEGED MSRB RULE G-36 - MEMBER FIRM FAILED TO TIMELY SUBMIT FORMS G36(OS) TO THE MUNICIPAL SECURITIES RULEMAKING BOARD ("MSRB"). Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, SOUTHWEST SECURITIES, INC. CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS, THEREFORE, THE FIRM IS FINED $5,000.00.

Allegations: SEC RULES 17A-3, 17A-4, NASD RULES 2110, 2320, 3110, 6230(A), 6230(C)(8), MSRB RULES G-14, G-17, G-27(A) - SOUTHWEST SECURITIES, INC. FAILED TO PRESERVE BROKERAGE ORDER MEMORANDA FOR A PERIOD OF NOT LESS THAN THREE YEARS, THE FIRST TWO IN AN ACCESSIBLE PLACE; AND FAILED TO SHOW THE DATE OF EXECUTION, THE TIME OF EXECUTION, THE TIME OF ENTRY AND/OR THE TERMS AND CONDITIONS OF EACH ORDER ON BROKERAGE ORDER MEMORANDA. IN TRANSACTIONS FOR OR WITH A CUSTOMER, THE FIRM FAILED TO USE REASONABLE DILIGENCE TO ASCERTAIN THE BEST INTER-DEALER MARKET AND FAILED TO BUY OR SELL IN SUCH MARKET SO THAT THE RESULTANT PRICES TO ITS CUSTOMERS WERE AS FAVORABLE AS POSSIBLE UNDER PREVAILING MARKET CONDITIONS. THE FIRM FAILED TO REPORT TO TRACE THE CORRECT TIME OF TRADE EXECUTION FOR TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES AND FAILED TO REPORT TO TRACE TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES EXECUTED ON A BUSINESS DAY DURING TRACE SYSTEM HOURS WITHIN 30 MINUTES OF THE TIME OF EXECUTION. THE FIRM FAILED TO REPORT INFORMATION REGARDING PURCHASE AND SALE TRANSACTIONS IN MUNICIPAL SECURITIES TO THE REAL-TIME TRANSACTION REPORTING SYSTEM (RTRS) IN THE MANNER PRESCRIBED BY RULE G-14 RTRS PROCEDURES AND THE RTRS USERS MANUAL BECAUSE IT FAILED TO REPORT INFORMATION ABOUT TRANSACTIONS WITHIN 15 MINUTES OF TIME OF TRADE TO AN RTRS PORTAL. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND MSRB RULES CONCERNING TIMELY REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS. 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 IS CENSURED, FINED $67,500 AND REQUIRED TO REVISE ITS SUPERVISORY PROCEDURES REGARDING THE TIMELY REPORTING OF MUNICIPAL SECURITIES TRANSACTIONS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC. NO RESTITUTION WAS ORDERED BECAUSE THE FIRM HAD ALREADY PROVIDED THE REQUISITE PRICE IMPROVEMENTS TO THE CUSTOMERS ADVERSELY AFFECTED BY THE BEST EXECUTION VIOLATIONS OF NASD RULES 2110 AND 2320.

Allegations: DURING THE PERIOD FROM OCTOBER 2006 THROUGH APRIL 2009, THE FIRM PAID FIVE INDIVIDUALS, INCLUDING THREE FORMER TEXAS MUNICIPAL ISSUER OFFICIALS, TO SOLICIT MUNICIPAL SECURITIES BUSINESS ON ITS BEHALF. ALSO THE FIRM WAS FOUND TO HAVE VIOLATED MSRB RULES BY FAILING TO FILE 10 MSRB FORMS G-36(OS) AND G-36(ARD) IN A TIMELY MANNER AND FOR INACCURATELY REPORTING MORE THAN 300 MUNICIPAL SECURITIES TRANSACTIONS TO THE MSRB. Status: Final Sanction Detail: FIRM WAS CENSURED AND THEN ASSESSED AN ADMINISTRATIVE FINE IN THE AMOUNT OF $500,000.00, AND REQUIRED TO REVIEW ITS PROCEDURES REGARDING COMPLIANCE WITH ALL APPLICABLE MSRB RULES, AND CERTIFY IN WRITING WITHIN 60 DAYS THAT SYSTEMS AND PROCEDURES HAVE BEEN ESTABLISHED THAT ARE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE RULES.

Allegations: FINRA RULE 2010, NASD RULES 2110, 3010(A), 3010(B): SOUTHWEST SECURITIES (SOUTHWEST) HAD SUPERVISORY AND OPERATIONAL DEFICIENCIES WITH RESPECT TO ITS CLEARING SERVICES DEPARTMENT, CORRESPONDENT REVIEW COMMITTEE (REVIEW COMMITTEE), AND RISK MANAGEMENT PRACTICES FOR ITS CLEARING CORRESPONDENTS. THE DEFICIENCIES IN THE CLEARING SERVICES DEPARTMENT INCLUDED, AMONG OTHER THINGS, FAILURE TO HAVE WRITTEN SUPERVISORY AND OPERATIONAL SYSTEMS AND PROCEDURES, FAILURE TO HAVE ADEQUATE WRITTEN JOB DESCRIPTIONS AND PERFORM ADEQUATE JOB TRAINING, FAILURE TO PERFORM ADEQUATE DUE DILIGENCE AND/OR RISK ASSESSMENT WITH RESPECT TO PROSPECTIVE CORRESPONDENTS, AND FAILURE TO HAVE PROCEDURES FOR THE ESCALATION OF SIGNIFICANT EVENTS INVOLVING CORRESPONDENTS. AS A RESULT, CLEARING SERVICES EMPLOYEES DID NOT HAVE A CLEAR UNDERSTANDING OF CERTAIN INDIVIDUAL FUNCTIONS AND/OR RESPONSIBILITIES, AND FUNCTIONS WHICH SHOULD HAVE BEEN PERFORMED WERE NOT, BASED ON MISUNDERSTANDINGS AS TO WHICH CLEARING SERVICE EMPLOYEES WAS RESPONSIBLE TO PERFORM THAT FUNCTION. SOUTHWEST DID NOT HAVE WRITTEN PROCEDURES WITH REGARD TO DUE DILIGENCE TO BE PERFORMED REGARDING POTENTIAL CORRESPONDENT CLEARING CLIENTS; RATHER, IT REQUIRED THE POTENTIAL CLIENT TO FILL OUT A QUESTIONNAIRE AND SUPPLY CERTAIN DOCUMENTATION, AND USED A CHECKLIST OF DOCUMENTS AND INFORMATION TO BE OBTAINED FROM THE POTENTIAL CLIENT. ALTHOUGH THE FIRM'S PERSONNEL HAD DISCRETION TO OMIT INFORMATION FROM THE CHECKLIST BECAUSE OF THE LACK OF PROCEDURES, THERE WAS NO METHOD OF ENSURING THAT SUCH OMISSION OR DEVIATIONS WERE REASONABLE AND APPROPRIATE. THE DEFICIENCIES WITH RESPECT TO SOUTHWEST'S REVIEW COMMITTEE INCLUDED, AMONG OTHER THINGS, FAILURE TO HAVE WRITTEN POLICIES AND PROCEDURES FOR THE REVIEW COMMITTEE, AND FAILURE BY THE REVIEW COMMITTEE TO PERFORM ADEQUATE DUE DILIGENCE AND/OR RISK ASSESSMENT WITH RESPECT TO PROSPECTIVE CORRESPONDENTS. SOUTHWEST FAILED TO HAVE ADEQUATE SYSTEMS AND PROCEDURES TO IDENTIFY AND MANAGE CERTAIN RISKS ASSOCIATED WITH ITS CORRESPONDENT RELATIONSHIPS AND THE TRADING OF THOSE CORRESPONDENTS, AND THEREFORE FAILED TO ADEQUATELY ASSESS AND MANAGE THE RISKS ASSOCIATED WITH ITS CORRESPONDENTS, BOTH AT THE INITIATION OF SUCH A RELATIONSHIP AND ON A CONTINUING BASIS THEREAFTER. AMONG OTHER THINGS, SOUTHWEST FAILED TO BE AWARE OF THE BROKER-DEALERS WITH WHICH IT HAD A CORRESPONDENT RELATIONSHIP, AND FAILED TO NOTIFY NATIONAL SECURITIES CLEARING CORPORATION (NSCC) AND THE NASDAQ RISK MANAGEMENT SYSTEM OF THE TERMINATION OF CORRESPONDENT RELATIONSHIPS AND THEREFORE EFFECTIVELY TERMINATE ITS CLEARING LIABILITY; PREMATURELY ACCEPTED CLEARING LIABILITY FOR A CORRESPONDENT BY NOTIFYING NSCC IT WAS PREPARED TO CLEAR FOR THE CORRESPONDENT WHEN IN FACT IT WAS NOT SO PREPARED; FAILED TO RECOGNIZE ITS CORRESPONDENTS' ABILITY TO TRADE AWAY FROM IT BASED ON THE CORRESPONDENTS' EXCHANGE MEMBERSHIP, AGREEMENTS AND ARRANGEMENTS; AND FAILED TO BE AWARE OF EXTERNAL PROCEDURES AND ESTABLISH INTERNAL PROCEDURES TO TERMINATE ON AN INTRA-DAY BASIS A CORRESPONDENT RELATIONSHIP AND THEREFORE THE CORRESPONDENT'S ABILITY TO TRADE. SUCH NOTICE WOULD PREVENT THE CORRESPONDENT FROM ENTERING ANY FURTHER TRADES, PREVENTS TRADES TO WHICH THE CORRESPONDENT WAS A COUNTER-PARTY FROM BEING REPORTED TO THE TRADE REPORTING FACILITY (TRF), AND WOULD ALLOW SOUTHWEST TO TERMINATE ITS FINANCIAL RESPONSIBILITY FOR THE CORRESPONDENT'S TRADING ONCE THE TERMINATION WAS GIVEN EFFECT AT NSCC. SOUTHWEST FAILED TO HAVE PROCEDURES TO ESTABLISH AND FAILED TO ESTABLISH REASONABLE NASDAQ AUTOMATED CONFIRMATION OF TRANSACTIONS (ACT) RISK MANAGEMENT LIMITS, AND FAILED TO HAVE PROCEDURES FOR MONITORING AND RESPONDING TO NASDAQ ACT RISK MANAGEMENT ALERTS. [CONTINUED IN ITEM 13] Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, SOUTHWEST CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE IT IS CENSURED, FINED $650,000 AND UNDERTAKES TO (1) DESIGNATE A RISK MANAGEMENT OFFICER WITHIN THE FIRM WHOSE PRIMARY RESPONSIBILITY SHALL BE IDENTIFICATION AND MANAGEMENT OF THE RISK ASSOCIATED WITH THE FIRM'S CORRESPONDENT CLEARING SERVICES BUSINESS; AND (2) WITHIN 30 BUSINESS DAYS OF NOTIFICATION OF ACCEPTANCE OF THIS AWC, A REGISTERED PRINCIPAL OF THE FIRM SHALL SUBMIT TO FINRA A SIGNED, DATED LETTER, GIVING THE FOLLOWING INFORMATION: (A) A REFERENCE TO THIS MATTER; (B) A REPRESENTATION THAT THE FIRM HAS DESIGNATED THE ABOVE-REFERENCED RISK MANAGEMENT OFFICER; (C) THE NAME OF THAT PERSON, AND THE DATE THE PERSON BEGAN THE ROLE; (D) A REPRESENTATION THAT THE FIRM HAD REVISED ITS WRITTEN SUPERVISORY AND OPERATIONAL PROCEDURES TO ADDRESS THE DEFICIENCIES DESCRIBED HEREIN; AND (E) THE DATE(S) THE REVISED PROCEDURES WERE IMPLEMENTED. Summary: [CONTINUED FROM ALLEGATIONS]: IN PART, AS A RESULT OF THE ABOVE MENTIONED PROCEDURAL, DUE DILIGENCE, AND OTHER DEFICIENCIES AND VIOLATIVE BEHAVIOR, IN OR ABOUT JUNE 2009, SOUTHWEST ENTERED INTO A CORRESPONDENT RELATIONSHIP WITH A FIRM WITHOUT HAVING PERFORMED ADEQUATE DUE DILIGENCE REGARDING THE OWNER OF THE FIRM AND/OR THE FIRM. DESPITE HAVING INFORMATION IN ITS POSSESSION AND BEING ALERTED TO THE SHARE VOLUME AND DOLLAR LEVELS OF THE FIRM'S RECENT TRADING, THE CLEARING SERVICES DEPARTMENT DID NOT INQUIRE FURTHER REGARDING THE FIRM'S TRADING HISTORY; IT SHOULD HAVE CONSIDERED THE RISK MANAGEMENT IMPLICATIONS OF THE TRADING PRACTICES. SOUTHWEST PREMATURELY NOTIFIED NSCC THAT IS WAS PREPARED TO START CLEARING FOR THE FIRM WHICH ENABLED THE FIRM TO START TRADING. WITHOUT EVEN A TRADING ACCOUNT OR TRADING DEPOSIT HAVING BEEN ESTABLISHED AT SOUTHWEST, THE FIRM PURCHASED AND SOLD SHARES OF A NYSE LISTED STOCK. NASDAQ RISK MANAGEMENT ALERTS NOTIFIED SOUTHWEST OF THE FIRM'S TRADING IN EXCESS OF THE $100,000 THRESHOLD SET BY SOUTHWEST, BUT SOUTHWEST FAILED TO TIMELY RESPOND TO SUCH ALERTS OR TERMINATE ITS CLEARING RELATIONSHIP WITH THE FIRM ON THAT TRADING DAY. AFTER THE FIRM ESTABLISHED A TRADING ACCOUNT AT SOUTHWEST AND MADE A TRADING DEPOSIT, THE FIRM ENGAGED IN FURTHER TRADING EVEN THOUGH SOUTHWEST HAD STILL NOT ESTABLISHED A METHOD TO RECEIVE THE INFORMATION NECESSARY FOR SOUTHWEST TO CLEAR ITS TRADES. THE FIRM'S SECOND DAY OF TRADING RESULTED IN AN UNSECURED LOSS IN ITS ACCOUNT AT THE FIRM IN EXCESS OF $6.3 MILLION.

Allegations: EXCHANGE ACT RULE 15C3-3, NASD RULE 2110: THE FIRM FAILED TO TAKE PROMPT AND APPROPRIATE ACTION TO RESOLVE SECURITIES DEFICITS AND FAILED TO COMPLY WITH REQUIREMENTS CONCERNING POSSESSION OR CONTROL OF SECURITIES. THE FIRM DID NOT PROMPTLY OBTAIN POSSESSION OR CONTROL OF FIVE SECURITIES IN WHICH IT HAD DEFICITS. REGARDLESS OF HOW THE DEFICITS AT ISSUE OCCURRED, EXCHANGE ACT RULE 15C3-3 REQUIRED THAT THE FIRM TAKE TIMELY STEPS TO ELIMINATE THEM. THOSE STEPS INCLUDED ISSUING NOTICES TO OTHER FIRMS TO WHOM THE FIRM HAD LOANED SECURITIES IN WHICH DEFICITS OCCURRED AND REQUESTING THAT THE BORROWING FIRMS RETURN A SUFFICIENT NUMBER OF SHARES OF THOSE SECURITIES TO COVER THE DEFICITS; MAKING ATTEMPTS TO BORROW THE SECURITIES AND DOCUMENTING THOSE ATTEMPTS; AND/OR BUYING THE SECURITIES IN THE MARKET. IN THESE INSTANCES, THE FIRM WAS REQUIRED TO TAKE ACTION TO ELIMINATE SUCH DEFICITS, INCLUDING STEPS PRESCRIBED IN EXCHANGE ACT RULE INTERPRETATION 15C3-3(D)(1)/101. INSTEAD, THE FIRM FAILED TO ISSUE STOCK LOAN RECALL NOTICES ON A TIMELY BASIS FOR A SUFFICIENT NUMBER OF SHARES TO COVER THE SIZE OF THE DEFICITS, AND TO MAKE CONTINUING STOCK BORROW ATTEMPTS DURING THE EXISTENCE OF THE DEFICITS. IN ADDITION, TO COMPLY WITH RULE 15C3-3(D), THE FIRM ALSO NEEDED TO KEEP APPROPRIATE RECORDS OF THE ACTIONS IT TOOK TO ELIMINATE SECURITIES DEFICITS, WHETHER ATTEMPTING TO BORROW SECURITIES, RECALLING LOANED SECURITIES OR MAKING PURCHASES OF SECURITIES IN THE MARKET (KNOWN AS "BUY-INS"). THE FIRM'S TWO DOCUMENTED BORROW ATTEMPTS WERE INADEQUATE TO COMPLY WITH POSSESSION OR CONTROL REQUIREMENTS. IN ANOTHER INSTANCE, THE FIRM FAILED TO DOCUMENT WHETHER IT HAD ATTEMPTED TO BORROW SECURITIES OR TAKEN OTHER APPROPRIATE ACTION TO OBTAIN POSSESSION OR CONTROL OF SECURITY SHARES WHEN THERE WAS AN EXISTING DEFICIT IN THAT SECURITY. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE IT IS CENSURED AND FINED $50,000.

Allegations: MSRB RULES G-32(A)(I), G-32(B)(I), G-32(B)(II):THE FIRM FAILED TO PROVIDE THE OFFICIAL STATEMENT (OS) IN A MUNICIPAL SECURITIES OFFERING TO CUSTOMERS WHOSE TRANSACTIONS SETTLED ON A CERTAIN DAY; THERE WERE SEVERAL RELEVANT TRANSACTIONS TOTALING $13,525,000 THAT SETTLED ON THAT DAY. THE FIRM FAILED TO TIMELY SUBMIT THE OS TO THE ELECTRONIC MUNICIPAL MARKET ACCESS (EMMA) SYSTEM IN SOME MUNICIPAL OFFERINGS, AND FILED AN INACCURATE OS IN AN OFFERING. THE FIRM FAILED TO TIMELY SUBMIT THE ADVANCE REFUNDING DOCUMENT (ARD) TO EMMA IN SOME MUNICIPAL OFFERINGS. 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 IS CENSURED AND FINED $85,000.

Allegations: FINRA RULES 2010, 6730(A), MSRB RULES G-17, G-27, G-30(A) - SOUTHWEST SECURITIES, INC. PURCHASED MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT FROM CUSTOMERS AND/OR SOLD MUNICIPAL SECURITIES FOR ITS OWN ACCOUNT TO CUSTOMERS AT AN AGGREGATE PRICE (INCLUDING ANY MARKDOWN OR MARKUP) THAT WAS NOT FAIR AND REASONABLE, TAKING INTO CONSIDERATION ALL RELEVANT FACTORS, INCLUDING THE BEST JUDGMENT OF THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALER AS TO THE FAIR MARKET VALUE OF THE SECURITIES AT THE TIME OF THE TRANSACTION AND OF ANY SECURITIES EXCHANGED OR TRADED IN CONNECTION WITH THE TRANSACTION, THE EXPENSE INVOLVED IN EFFECTING THE TRANSACTION, THE FACT THAT THE BROKER, DEALER OR MUNICIPAL SECURITIES DEALER IS ENTITLED TO A PROFIT, AND THE TOTAL DOLLAR AMOUNT OF THE TRANSACTION. THE FIRM'S SUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISION REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH APPLICABLE SECURITIES LAWS, REGULATIONS AND MSRB RULES, CONCERNING FAIR AND REASONABLE PRICING TO CUSTOMERS IN MUNICIPAL BOND TRANSACTIONS. THE FIRM FAILED TO REPORT TO THE TRADE REPORTING AND COMPLIANCE ENGINE (TRACE) SOME TRANSACTIONS IN TRACE-ELIGIBLE SECURITIES WITHIN 15 MINUTES OF EXECUTION TIME. THIS CONDUCT CONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF FINRA RULE 6730(A) AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUT EXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF FINRA RULE 2010. 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 IS CENSURED, FINED $77,500,OF WHICH $70,000 IS FOR MSRB RULE VIOLATIONS, ORDERED TO PAY $32,167.14, PLUS INTEREST, IN RESTITUTION TO CUSTOMERS, AND REQUIRED TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES REGARDING FAIR AND REASONABLE PRICING TO CUSTOMERS IN MUNICIPAL BOND TRANSACTIONS WITHIN 30 BUSINESS DAYS OF ACCEPTANCE OF THIS AWC BY THE NAC. A REGISTERED FIRM PRINCIPAL SHALL SUBMIT SATISFACTORY PROOF OF PAYMENT OF THE RESTITUTION, OR OF REASONABLE AND DOCUMENTED EFFORTS UNDERTAKEN TO EFFECT RESTITUTION, TO FINRA NO LATER THAN 120 DAYS AFTER ACCEPTANCE OF THIS AWC. ANY UNDISTRIBUTED RESTITUTION AND INTEREST SHALL BE FORWARDED TO THE APPROPRIATE ESCHEAT, UNCLAIMED PROPERTY OR ABANDONED PROPERTY FUND FOR THE STATE IN WHICH THE CUSTOMER LAST RESIDED.

Allegations: FINRA RULES 2010, 6380A = SOUTHWEST SECURITIES, INC. FAILED, WITHIN 90 SECOND AFTER EXECUTION, TO TRANSMIT TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) LAST SALE REPORTS OF TRANSACTIONS IN DESIGNATED SECURITIES. THIS CONDUCT CONSTITUTES SEPARATE AND DISTINCT VIOLATIONS OF FINRA RULE 6380A AND A PATTERN OR PRACTICE OF LATE REPORTING WITHOUT EXCEPTIONAL CIRCUMSTANCES IN VIOLATION OF FINRA RULE 2010. Status: Final Sanction Detail: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE, THE FIRM IS FINED $5,000.

Allegations: SEC RULE 204(A)(1) OF REGULATION SHO - SOUTHWEST SECURITIES, INC. HAD FAIL-TO-DELIVER POSITIONS AT A REGISTERED CLEARING AGENCY IN AN EQUITY SECURITY THAT RESULTED FROM A LONG SALE AND DID NOT CLOSE OUT THE FAIL-TO-DELIVER POSITIONS BY PURCHASING OR BORROWING SECURITIES OF LIKE KIND AND QUANTITY WITHIN THE TIME FRAME PRESCRIBED BY RULE 204(A)(1) OF REGULATION SHO. 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 IS CENSURED AND FINED $10,000.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TO REPORT TO THE TRADE REPORTING AND COMPLIANCE ENGINE (TRACE) THE CORRECT TIME OF TRADE EXECUTION FOR TRANSACTIONS IN TRACE-ELIGIBLE SECURITIZED PRODUCTS AND FAILED TO SHOW THE CORRECT TIME OF EXECUTION ON THE MEMORANDA OF BROKERAGE ORDERS. Status: Final Sanction Detail: SEE ABOVE.

Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED, WITHIN 30 SECONDS AFTER EXECUTION, TO TRANSMIT LAST SALE REPORTS OF TRANSACTIONS IN DESIGNATED SECURITIES TO THE FINRA/NASDAQ TRADE REPORTING FACILITY (FNTRF) AND IT FAILED TO REPORT THE CORRECT TIME OF EXECUTION IN LAST SALE REPORTS OF TRANSACTIONS IN DESIGNATED SECURITIES TO THE FNTRF. THE FINDINGS STATED THAT 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 FINRA RULES CONCERNING THE TIMELY SUBMISSION OF ACCURATE TRADE REPORTS TO THE FNTRF. SPECIFICALLY, THE FIRM'S SUPERVISORY SYSTEM DID NOT INCLUDE WRITTEN SUPERVISORY PROCEDURES PROVIDING FOR THE SUPERVISORY STEPS TO BE TAKEN TO ENSURE TIMELY SUBMISSION OF ACCURATE TRADE REPORTS TO THE FNTRF AND A STATEMENT AS TO HOW THE COMPLETION OF THE STEPS INCLUDED IN THE WRITTEN SUPERVISORY PROCEDURES SHOULD BE DOCUMENTED. Status: Final Sanction Detail: THE FIRM WAS CENSURED, FINED $17,500 AND UNDERTAKES TO REVISE ITS WRITTEN SUPERVISORY PROCEDURES.

Allegations: HILLTOP SECURITIES INC. VIOLATED CBOE RULE 8.43 IN THAT THE FIRM FAILED TO REPORT OR INACCURATELY REPORTED POSITIONS TO THE LOPR IN APPROXIMATELY 131,112 INSTANCES AND FAILED TO ACCURATELY REPORT THE ACCOUNT NUMBER FOR ALL RECORDS SUBMITTED TO THE LOPR IN APPROXIMATELY 1.6 MILLION INSTANCES. THE FIRM ALSO VIOLATED CBOE RULE 8.16 BY FAILING TO ESTABLISH, MAINTAIN, AND ENFORCE SUPERVISORY SYSTEMS, INCLUDING WSPS, THAT WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH CBOE RULE 8.43. Status: Final Sanction Detail: A CENSURE AND A MONETARY FINE IN THE AMOUNT OF $170,000.

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 THOSE 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 THT 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 IT 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

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 APPOXIMATELY 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.