States Report Increased Withdrawals of Licenses of Unscrupulous Brokers, Investment Advisers

NASAA Enforcement Report Details Investor Protection Role of State Securities Regulators

Download: 2013 Enforcement Report on 2012 Data (pdf)

WASHINGTON (October 31, 2013) – The North American Securities Administrators Association (NASAA) today reported a significant rise in the number of licenses of unscrupulous stockbrokers and investment advisers withdrawn due to state action.

According to NASAA’s annual enforcement survey, the number of licenses withdrawn due to state enforcement actions increased by 27 percent to 3,564 from 2,796. The increase is attributable in part to the completion of the investment adviser “switch,” where as many as 2,100 investment advisers transitioned from federal to state oversight as mandated by the Dodd-Frank Act.

“Closer scrutiny of licensing applications has resulted in a noticeable increase in the number of licensing withdrawals in the past year,” said Andrea Seidt, NASAA President and Ohio Securities Commissioner. “Our survey shows several important trends in investor protection and securities regulation, including continued investor reliance on state regulators to address both traditional areas of securities fraud and emerging issues.”

Overall, state securities regulators conducted 5,865 investigations in 2012, which led to 2,496 criminal, administrative and civil enforcement actions. The report noted that 15 percent of state enforcement actions involved financial abuse of seniors. Prison time resulting from state-initiated actions totaled 1,361 years.

State-initiated enforcement actions resulted in nearly $700 million in investor restitution orders in 2012. State securities regulators also levied fines or penalties and collected costs in excess of $157 million.

The majority of the investment fraud cases reported by state securities regulators continued to involve unregistered individuals selling unregistered securities. States reported 580 actions involving unregistered securities and 576 actions involving unregistered firms or individuals.

For the third consecutive year, Regulation D Rule 506 private offerings were the most reported products at the heart of state securities enforcement actions. The report also noted emerging state enforcement trends, including the increased presence of questionable securities offerings made through the Internet. Other problem areas include affinity fraud, gold and precious metals, annuities, real estate investment trusts and foreign currency trading programs.

The report is based on the results of a survey of NASAA members during the spring of 2013. This year, 49 U.S. NASAA members responded to the survey, a response rate of 96 percent. The data, statistics and trends included in the report provide a general overview of state securities enforcement efforts. The complete report is available on the NASAA website, here.


For More Information:
Bob Webster | Director of Communications

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