SECURITY AGREEMENT



THIS SECURITY  AGREEMENT (this "Agreement") made as of this 1st day of February,
2001 between Fiserv Securities, Inc., (the "Secured Party"), with offices at One
Commerce  Square,  2005 Market  Street,  Philadelphia,  PA 19103-3212  and First
Montauk  Financial  Corp.,  (the  "Company") at Parkway 109 Office  Center,  328
Newman Springs Road, Red Bank, NJ 07701.

         The  Amended  Financial  Agreement  dated as of  February  1, 2001 (the
"Amended  Financial  Agreement")  executed by the Company and the Secured Party,
which is incorporated by reference  hereto,  provides,  subject to its terms and
conditions, for an advance to the Company for which the Company granted the Lien
provided for in this Agreement,

         To induce the  Secured  Party to enter into,  and to make the  advances
under,  the  Amended  Financial  Agreement  and  for  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company  has agreed to  pledge,  assign  and grant a  security  interest  in the
Collateral  as security for the Secured  Obligations.  Accordingly,  the Company
agrees with the Secured Party as follows:


         1.   Definitions and Interpretation.
              ------------------------------

     1.1 Certain  Defined  Terms.  The following  terms shall have the following
meanings under this Agreement:

     "Basic  Document"  shall  mean the  Amended  Financial  Agreement  and this
Agreement.

     "Code"  shall  mean  the  Uniform  Commercial  Code  as in  effect  in  the
Commonwealth  of  Pennsylvania  from time to time or,  by  reason  of  mandatory
application, any other applicable jurisdiction.

     "Collateral" shall mean all right, title and interest of the Company in the
shares of  capital  stock (the  "Stock")  held by the  Company in the  following
subsidiary (the "Subsidiary") of the company:  One Million  (1,000,000)  shares,
which represents all issued and outstanding  shares of First Montauk  Securities
Corp. (the "Stock").

     "Default"  shall mean any event  requiring  a payment by Holding  Corp.  as
provided in Sections 3, 4 and 6(c)of the Amended Financial Agreement.

     "Lien"  shall mean,  with  respect to any  property,  any  mortgage,  lien,
pledge, charge,  security interest or encumbrance of any kind in respect of such
property or any agreement to give, or notice of, any of the foregoing.

     "Secured Obligations" shall mean any and all obligations of the Company for
the payment of all amounts owed under the Amended Financial Agreement.

     1.2  Interpretation.  In this Agreement,  unless otherwise  indicated,  the
singular  includes the plural and plural the singular;  words  importing  either
gender include the other gender; references to statutes or regulations are to be
construed as including  all statutory or  regulatory  provisions  consolidating,
amending or  replacing  the statute or  regulation  referred to;  references  to
"writing" include printing,  typing,  lithography and other means of reproducing
words  in a  tangible  visible  form;  the  words  "including,"  "includes"  and
"include"  shall be deemed to be  followed  by the words  "without  limitation";
references  to  articles,  sections (or  subdivisions  of  sections),  exhibits,
annexes or schedules are to this  Agreement;  references to agreements and other
contractual  instruments  shall be deemed to include all subsequent  amendments,
extensions  and  other  modifications  to such  instruments  (without,  however,
limiting  any  prohibition  on  any  such   amendments,   extensions  and  other
modifications  by the terms of any such document);  and references to persons or
entities including their respective permitted successors and assigns.
<PAGE>



         2.   Collateral.
              ----------

                  2.1 Grant.  As collateral  security for the prompt  payment in
full when due (whether at stated  maturity,  by  acceleration  or otherwise) and
performance of the Secured Obligations,  the Company hereby pledges, assigns and
grants to the Secured Party a security  interest in all of the Company's  right,
title and interest in and to the Collateral.

                  2.2 Perfection.  Concurrently  with the execution and delivery
of this  Agreement,  the Company shall (i) file such  financing  statements  and
other  documents in such offices as the Secured Party may reasonably  request in
writing to perfect  and  establish  the Lien  granted  by this  Agreement,  (ii)
deliver to the  attorneys  for the Secured Party and pledge to the Secured Party
certificates  representing  the Stock,  and (iii) take all such other actions as
shall be necessary or as the Secured  Party may request to perfect and establish
the priority of the Lien granted by this Agreement.

                  2.3   Rights and Obligations.
                        ----------------------

     (a) The  exercise  by the  Secured  Party of any  right,  remedy,  power or
privilege in respect of this Agreement shall not release the Company from any of
its duties and obligations under the Amended  Financial  Agreement except to the
extent  such  obligations  are  discharged  by any remedy  under this  agreement
utilized by the Secured Party.

     (b) No Lien granted by this  Agreement in the  Company's  right,  title and
interest  in any  contract or  agreement  shall be deemed to be a consent by the
Secured Party to any such contract or agreement.

     (c) No  reference  in this  Agreement  to  proceeds or to the sale or other
disposition  of  Collateral  shall  authorize  the Company to sell or  otherwise
dispose of any Collateral.

     (d) The Secured  Party shall not be  required  to take steps  necessary  to
preserve any rights against prior parties to any part of the Collateral.

     3.  Representations,  Warranties  and  Covenants.  As of the  date  of this
Agreement,  the Company represents,  warrants and covenants to the Secured Party
as follows:

     3.1 Title.  The Company is the sole  beneficial  owner of the Collateral in
which  it  purports  to  grant a Lien  pursuant  to  this  Agreement,  and  such
Collateral is free and clear of all Liens. The Lien granted by this Agreement in
favor of the Secured  Party has attached and  constitutes  a perfected  security
interest in all of such Collateral prior to all other Liens.

     3.2 Sales and Other Liens. The Company shall not dispose of any Collateral,
create, incur, assume or suffer to exist any Lien upon any Collateral or file or
suffer  to be on  file  or  authorize  to be  filed,  in any  jurisdiction,  any
financing  statement or like  instrument  with respect to all or any part of the
Collateral in which the Secured Party is not named as the sole secured party.

     3.3 Principal Place of Business.  The Company's chief executive  office and
principal place of business is located at the address set forth below.

     3.4 Further Assurances. The Company agrees that, from time to time upon the
written request of the Secured Party,  the Company will execute and deliver such
further  documents  and do such other acts and things as the  Secured  Party may
reasonably request in order fully to effect the purposes of this Agreement.

     3.5 Stock and Future Issuances. The Stock constitutes all of the issued and
outstanding  shares of capital stock of the  Subsidiary.  No additional  capital
stock of the Subsidiary may be issued,  and no transfer of all, or substantially
all,  of the  assets  of the  Subsidiary  shall  be  made  for  less  than  fair
consideration,  until the  satisfaction  of all obligations of the Company under
the Amended Financial Agreement in full.
<PAGE>



     4. Remedies.

     4.1 Events of  Default,  Etc.  If any Default  shall have  occurred  and be
continuing:

     (a) The Secured Party in its discretion  may, upon ten business days' prior
written notice to the Company of the time and place,  with respect to all or any
part of the  Collateral  which shall then be or shall  thereafter  come into the
possession,  custody or control of the Secured Party or any of its agents, sell,
or  otherwise  dispose of all or any part of such  Collateral,  at such place or
places as the  Secured  Party  deems  best,  for cash,  for credit or for future
delivery  (without  thereby  assuming  any credit risk) and at public or private
sale,  without  demand of  performance or notice of intention to effect any such
disposition  or of time or place of any such  sale  (except  such  notice  as is
required above or by applicable  statute and cannot be waived),  and the Secured
Party or any other person or entity may be the purchaser, lessee or recipient of
any or all of the  Collateral  so  disposed  of at any public  sale (or,  to the
extent  permitted  by law, at any  private  sale) and  thereafter  hold the same
absolutely, free from any claim or right of whatsoever kind, including any right
or equity of  redemption  (statutory  or  otherwise),  of the Company,  any such
demand,  notice and right or equity being hereby  expressly waived and released.
The Secured  Party may,  without  notice or  publication,  adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale,  and such sale may be made at any time
or place to which the sale may be so adjourned; and

     (b) The Secured Party shall have, and in its discretion may exercise,  upon
ten  business  days' prior  written  notice to the  Company,  all of the rights,
remedies,  powers and  privileges  with respect to the  Collateral  of a secured
party under the Code  (whether or not the Code is in effect in the  jurisdiction
where such  rights,  remedies,  powers and  privileges  are  asserted)  and such
additional rights,  remedies,  powers and privileges to which a secured party is
entitled  under  the  laws in  effect  in any  jurisdiction  where  any  rights,
remedies,  powers and  privileges in respect of this Agreement or the Collateral
may be asserted, including the right, to the maximum extent permitted by law, to
exercise all voting,  consensual and other powers of ownership pertaining to the
Collateral  as if the  Secured  Party  were the sole and  absolute  owner of the
Collateral (and the Company agrees to take all such action as may be appropriate
to give effect to such right).

The proceeds of, and other  realization  upon,  the  Collateral by virtue of the
exercise of remedies under this Section 4.1 shall be applied in accordance  with
Section 4.4.

     4.2  Deficiency.  If the  proceeds  of,  or  other  realization  upon,  the
Collateral  by  virtue  of the  exercise  of  remedies  under  Section  4.1  are
insufficient to cover the costs and expenses of such exercise and the payment in
full of the other Secured  Obligations,  the Company shall remain liable for any
deficiency.

     4.3 Private Sale.

     (a) The Secured  Party shall  incur no  liability  as a result of the sale,
lease or other  disposition  of all or any part of the Collateral at any private
sale pursuant to Section 4.1 conducted in a commercially  reasonable manner. The
Company  hereby waives any claims against the Secured Party arising by reason of
the fact  that the price at which  the  Collateral  may have been sold at such a
private sale was less than the price which might have been  obtained at a public
sale or was less than the aggregate amount of the Secured  Obligations,  even if
the  Secured  Party  accepts  the first  offer  received  and does not offer the
Collateral to more than one offeree.

     (b)  The  Company  recognizes  that,  by  reason  of  certain  prohibitions
contained in the Securities Act of 1933 and applicable  state  securities  laws,
the Secured Party may be compelled,  with respect to any sale of all or any part
of the  Collateral,  to limit  purchasers  to those who will agree,  among other
things, to acquire the Collateral for their own account,  for investment and not
with a view to distribution or resale.  The Company  acknowledges  that any such
private sales may be at prices and on terms less  favorable to the Secured Party
than those  obtainable  through a public sale  without such  restrictions,  and,
notwithstanding  such  circumstances,  agree that any such private sale shall be
deemed  to have  been  made in a  commercially  reasonable  manner  and that the
Secured  Party  shall  have no  obligation  to  engage  in  public  sales and no
obligation to delay the sale of any  Collateral for the period of time necessary
to permit the  respective  Issuer of such  Collateral  to register it for public
sale.
<PAGE>



     4.4 Application of Proceeds. Except as otherwise expressly provided in this
Agreement and except as provided  below in this Section 4.4, the proceeds of, or
other  realization  upon,  all or any part of the  Collateral  by  virtue of the
exercise  of remedies  under  Section 4.1 and any other cash at the time held by
the Secured Party under this Agreement, shall be applied by the Secured Party:

     First,  to the  payment  of the  costs and  expenses  of such  exercise  of
remedies,  including reasonable  out-of-pocket costs and expenses of the Secured
Party,  the fees and  expenses of its agents and counsel and all other  expenses
incurred and advances made by the Secured Party in that connection;

     Next, to the payment in full of the remaining  Secured  Obligations in such
manner as the Secured Party may determine; and

     Finally,  to the payment to the Company,  or its  respective  successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.

     As used in this  Section  4,  "proceeds"  of  Collateral  shall  mean cash,
securities and other property  realized in respect of, and distributions in kind
of,   Collateral,   including  any  property   received  under  any  bankruptcy,
reorganization  or other similar  proceeding as to the Company or any issuer of,
or account debtor or other obligor on, any of the Collateral.

     5. Miscellaneous.

     5.1 Waiver.  No failure on the part of the Secured Party to exercise and no
delay in  exercising,  and no course of  dealing  with  respect  to,  any right,
remedy,  power or privilege  under this  Agreement  shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or  further  exercise  of any such  right,  remedy,  power or  privilege  or the
exercise of any other right, remedy, power or privilege.  The rights,  remedies,
powers  and  privileges  provided  in  this  Agreement  are  cumulative  and not
exclusive of any rights, remedies, powers and privileges provided by law.

     5.2  Notices.  All  notices  and  communications  to be  given  under  this
Agreement  shall be given or made in writing to the  intended  recipient  at the
address  specified  below or, as to any party, at such other address as shall be
designated  by such party in a notice to each other  party.  Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when  transmitted by telex or telecopier,  delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 5.2:

                  As to the Introducing Firm:

                           Mr. William Kurinsky, CFO and COO
                           First Montauk Securities Corp.
                           328 Newman Springs Road
                           Parkway 109 Office Center
                           Red Bank, NJ  07701

                  As to the Clearing Agent:

                           Mr. Lawrence E. Donato, President
                           Fiserv Securities, Inc.
                           One Commerce Square
                           2005 Market Street
                           Philadelphia, PA 19103-3212

                  As to the Holding Corp.:

                           Mr. William Kurinsky, CFO and COO
                           First Montauk Financial Corp.
                           328 Newman Springs Road
                           Parkway 109 Office Center
                           Red Bank, NJ  07701
<PAGE>



                    With a copy to:

                           Mr. Scott M. Donnini, VP, General Counsel & Secretary
                           Fiserv Securities, Inc.
                           One Commerce Square
                           2005 Market Street
                           Philadelphia, PA  19103-3212

                           Mr. Paul A. Lieberman-General Counsel
                           First Montauk Securities Corp.
                           Parkway 109 Office Center
                           328 Newman Springs Road
                           Red Bank, NJ  07701

                           Victor J. DiGioia
                           Goldstein & DiGioia, LLP
                           369 Lexington Avenue
                           New York, NY 10017


                  5.3 Expenses,  Etc. The Company  agrees to pay or to reimburse
the Secured Party for all costs and expenses  (including  reasonable  attorney's
fees and  expenses)  that may be incurred by the Secured  Party in any effort to
enforce  any of the  provisions  of Section 4 or any of the  obligations  of the
Company in respect of the Collateral or in connection with (a) the  preservation
of the Lien of, or the rights of the Secured  Party under this  Agreement or (b)
any  actual  or  attempted  sale,  lease,  disposition,   exchange,  collection,
compromise,  settlement  or other  realization  in  respect  of, or care of, the
Collateral,  including  all such costs and expenses (and  reasonable  attorney's
fees and expenses) incurred in any bankruptcy,  reorganization, workout or other
similar proceeding relating to the Company.

                  5.4  Amendments,  Etc. Any provision of this  Agreement may be
modified,  supplemented or waived only by an instrument in writing duly executed
by the Company and the  Secured  Party.  Any such  modification,  supplement  or
waiver  shall be for such  period  and  subject to such  conditions  as shall be
specified  in the  instrument  effecting  the same and shall be binding upon the
Secured Party,  each holder of any of the Secured  Obligations  and the Company,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.

                  5.5  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the Company,  the Secured Party and each holder
of any of the Secured Obligations and their respective  successors and permitted
assigns.  The  Company  shall not  assign or  transfer  its  rights  under  this
Agreement without the prior written consent of the Secured Party.

                  5.6 Survival.  All representations and warranties made in this
Agreement or in any  certificate or other document  delivered  pursuant to or in
connection  with this Agreement shall survive the execution and delivery of this
Agreement  or such  certificate  or other  document  (as the case may be) or any
deemed repetition of any such representation or warranty.

                  5.7 Agreements Superseded. This Agreement supersedes all prior
agreements and  understandings,  written or oral, among the parties with respect
to the  subject  matter of this  Agreement,  except  for the  Amended  Financial
Agreement and the Clearing  Agreement entered into and between the Secured Party
and the Subsidiary dated May 8, 2000, as amended February 1, 2001.

                  5.8  Severability.  Any  provision of this  Agreement  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining   provisions  of  this  Agreement,   and  any  such
prohibition  or  unenforceability  in any  jurisdiction  shall not invalidate or
render unenforceable such provision in any other jurisdiction.
<PAGE>



                  5.9 GOVERNING LAW; SUBMISSION TO JURISDICTION.  THIS AGREEMENT
SHALL  BE  GOVERNED  BY,  AND  CONSTRUED  IN  ACCORDANCE  WITH,  THE  LAW OF THE
COMMONWEALTH  OF  PENNSYLVANIA.  THE COMPANY HEREBY SUBMITS TO THE  NONEXCLUSIVE
JURISDICTION  OF THE UNITED STATES  DISTRICT  COURT FOR THE EASTERN  DISTRICT OF
PENNSYLVANIA AND OF ANY PENNSYLVANIA STATE COURT SITTING IN PENNSYLVANIA FOR THE
PURPOSES OF ALL LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE  TRANSACTIONS  CONTEMPLATED  BY THIS AGREEMENT.  THE COMPANY  IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

         IN WITNESS  WHEREOF,  the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

First Montauk Financial Corp.               Fiserv Securities, Inc.

By: ____________________________            By: _______________________________

Title: _________________________            Title: ____________________________