Report Spotlights Strong Investor Protection Record of State Securities Regulators

Download: 2010 Enforcement Report

WASHINGTON (October 19, 2011) – The North American Securities Administrators Association (NASAA) today reported a 51 percent increase in the number of enforcement actions by state securities regulators in 2010, which led to a nearly 200 percent increase in the amount of money ordered returned to investors.

According to the NASAA report, state securities regulators conducted 7,063 investigations in 2010, which led to 3,475 enforcement actions, up from 2,294 enforcement actions in the previous year. Enforcement actions include criminal, administrative and civil actions. Nearly 1,000 of these actions involved financial abuse of seniors.

“State securities regulators are committed to investor protection through the strong enforcement of state securities laws. We are in the trenches every day working to protect Main Street investors,” said Jack E. Herstein, NASAA President and Assistant Director of the Nebraska Department of Banking & Finance Bureau of Securities.

State-initiated enforcement actions resulted in $14.1 billion ordered returned to investors, with an actual reportable return of more than $12 billion, or 90 percent of ordered restitution, in the same year. Herstein noted that much of this restitution is attributable to repurchases of auction rate securities (ARS) stemming from state-led actions.

State securities regulators also took important investor protection actions by removing or barring unscrupulous investment advisers and brokers. In 2010, more than 3,242 licenses were withdrawn, denied, revoked, suspended or conditioned due to state actions, down 5 percent from 3,406 the year before. States levied fines or penalties of $171 million in 2010 and prison time resulting from state actions totaled 1,134 years.

The majority of the investment fraud cases reported by state securities regulators featured unregistered individuals selling unregistered securities. Nearly 900 reported actions involved unregistered securities, and almost 800 actions involved unregistered firms or individuals. Two specific products or investments were identified by state regulators far more than any other specific item: Rule 506 or Reg D offerings and real estate investments or interests, according to the report.

The report is based on the results of a survey of NASAA members during the spring of 2011. This year, 45 U.S. NASAA members responded to the survey, a response rate of 88 percent. The data, statistics and trends included in the report provide a general overview of the state of state enforcement efforts. The complete report is available on the NASAA website here.

NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.

For more information:
Bob Webster, Director of Communications
202-737-0900

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