B. Riley closes National Securities after FINRA deals

National Securities, a Florida-based brokerage firm, is no longer.

The 75-year-old company, acquired by B. Riley Financial last year, has now fully integrated its 575 independent brokers and financial advisers into its parent company. As part of the transition, National has officially adopted the B. Riley brand and transferred its advisor listings to its owner, under whose direction they work. The change comes after National and many of its brokers clashed with regulator FINRA over the course of sale of alternative investment products.

Brands and brokerages often disappear in the wake of M&A transactions. B. Riley, who is an investor in surf, skate and swimwear company Hurley, bought National in two transactions in 2018 and 2021 totaling $40.3 million. The parties had planned for the new business to close, according to B. Riley’s spokeswoman, Jo Anne McCusker.

The number of brokerages has shrunk by nearly a quarter over the past decade to 3,394 FINRA members, according to the regulator. During this period, industry growth has focused on RIAs: consulting firms and assets are at historic highs.

Most National reps will likely remain through the transition in a “wait-and-see” approach after a number of compliance cases involving sales of alternative products and numerous layoffs thinning their ranks, according to recruiter Jodie Papike, president of Cross-Search.

“These counselors have had a lot to deal with over the past few years,” she said. “There were question marks for the advisors about what was going to happen. In a way, it’s better for the advisors because B. Riley is stable. It creates a sense of stability.”

Former National CEO Michael Mullen and B. Riley Wealth Co-CEO Charles Hastings will lead the combined companies, and the two companies have sought to resolve compliance matters, including National’s $9 million FINRA settlement in June before completing the integration, they Told InvestmentNews last week.

The combined company remains focused on recruiting “high quality advisors,” McCusker said in an email. Incoming brokers can choose to be employees under B. Riley’s former W-2 advisor model or 1099 independent contractors like most National representatives.

“With the infrastructure to accommodate either type of advisor, we have the ability to meet the needs of growth-minded entrepreneurial advisors – in a way that best suits them, as an employee at full-time or freelance,” she said.

B. Riley, which has 2,000 employees, including those from its portfolio companies, did not have an immediate answer for the exact number of reps of each type. With an investor presentation as of May, the company’s wealth arm listed 650 reps, $30 billion in client assets and $391.6 million in revenue for the 12 months ending March.

B.Riley acquired wealth manager Wunderlich Securities in 2017 for $67 million. His other past investments include energy company CalNRG and The Arena Group, parent company of Sports Illustrated and personal finance website TheStreet.com.

“I think Mike brought a sense of urgency and a sense of management that really impressed me,” B. Riley president Bryant Riley said in a 2018 interview after the first transaction. Riley served on National’s board for just six months in 2012, a time when he said the company was unwilling to make necessary changes.

Mullen left his former practice as a financial adviser to take over as CEO in January 2017. After questions Regarding conflicts of interest with National’s sale of certain biotech investments, the company terminated about 300 representatives who Mullen said had too many disclosures on file or did not fit the company’s new culture. Despite the two FINRA cases this year relating to complex products linked to the IPONational also brings longstanding expertise in this area.

“B. Riley Wealth advisors are further empowered to serve their clients exceptionally well through the ability to leverage the diverse range of end-to-end services provided by B. Riley affiliates,” McCusker said.

To ensure National’s rep retention, Riley must deploy the staff and resources to quickly answer advisers’ questions and avoid further headaches that could cause them to leave, Papike said. The success of the integration will determine whether B. Riley’s second and biggest bet on wealth management pays off.

Issues for advisers “simply adding hours into their day for service issues” remains the dominant factor behind most decisions to leave a new parent company after an M&A deal, she said. “You add a lot of advisors to a back office, then the parent company decides to do a lot of layoffs.”