Reiterating National’s Independent Leadership, Regulatory Compliance and Investor Transparency Following Reuters Article

On August 2, 2018, Reuters published an article about Fortress Biotech’s relationship and business with National Holdings Corporation and its subsidiary National Securities. We believe the article was not fair and balanced, and it fails to meet the standards of responsible journalism. Had Reuters stated the facts, known by its reporters and editors, there would have been nothing negative to report. This is because National’s past few years tell a story of positive change and excellence—one that does not involve the questionable business practices alleged in the article.

Under the leadership of Michael Mullen since September 2016, National has implemented a stronger culture of compliance and greater transparency, acting in the best interest of our clients, employees and associates. Through this cultural change, National has emerged a stronger company today with a new core of senior management and board of directors. Integrity, Transparency, Compliance and Service Excellence have been at the heart of all the changes we’ve made, and they remain the foundational building blocks of the new National.

The Reuters story inaccurately depicts National as being controlled by Fortress Bio, our majority shareholder. In truth, National is independently managed and the leadership team answers to an independent Board of Directors. Since Fortress Bio became majority shareholder in 2016, Fortress Bio-related investments comprised only five percent of National Securities’ business revenue. Further, the few investments introduced by Fortress Bio were rigorously vetted by National’s investment banking and due diligence teams. These important facts were known to, and hidden by, Reuters’ staff. Our customers should feel safe in knowing that National only approves investments where the risk/reward metrics make sense, regardless of the source.

Additionally, Reuters unfairly depicts Dr. Jonathan Aschoff as a conflicted analyst who did not disclose the affiliation between Fortress Bio and three of the 23 companies in his coverage universe. This is false. Not only was the relationship disclosed, the disclosures met all regulatory requirements. National went even further last September when we implemented an enhanced disclosure practice on all affiliated companies. Reuters also failed to report that unaffiliated analysts from firms like Oppenheimer, Ladenburg, Zachs, LifeSci and H.C. Wainwright published opinions virtually identical to those of Dr. Aschoff, and some were even more bullish. These facts, along with all the additional analysts’ reports, were known to Reuters before the article was published.

Finally, we take issue with Reuters’ inference that National is recommending these investments to “naïve” investors for whom biotech is inappropriate. This is insulting to our valued clients, and it is not true. Numerous investment experts at National and elsewhere, including financial media such as Forbes, agree that biotech is appropriate for certain investors. Again, Reuters does not acknowledge the contrary view and reports opinion as if it were fact. At National, we pride ourselves on fiercely protecting the trust our clients place in us. We do not take this responsibility lightly, and we make certain that each investment is appropriately suitable for each investor.

Today, National is stronger than at any point in its 71-year history. National now has over 1,100 company associates located in 130+ affiliate and corporate offices in 30 states, and manages $12 billion in customer assets. The faith in National by customers and financial advisors is leading to record revenue, which is strong, independent and diversified. Over the past 24 months, our management team has exited close to 300 financial advisors who did not share our core values. We suspect some of these conflicted individuals made false statements to the Reuters reporter. This validates that we made the correct decision to exit them.

We continue to express gratitude to our clients, employees, and financial professionals for believing in us and supporting us despite this unbalanced and inaccurate reporting. Our commitment to each of you remains unchanged. Our future together has never been brighter.