States Report Increased Actions Involving Investment Advisers

Download: NASAA Enforcement Report

WASHINGTON (October 23, 2012) – The North American Securities Administrators Association (NASAA) today reported a significant increase in enforcement actions against investment adviser firms last year and a sharp rise in prison time for securities law violators.

According to NASAA’s annual enforcement survey, the number of enforcement actions involving investment adviser firms nearly doubled to 399 in 2011 and accounted for 15 percent of all enforcement actions handled by state securities regulators.

Overall, state securities regulators conducted 6,121 investigations in 2011, which led to 2,602 criminal, administrative and civil enforcement actions. The report noted that financial abuse of seniors was identified in nearly 600 reported enforcement actions. Prison time resulting from state-initiated actions totaled 1,662 years, up 47 percent from the year before.

“The report demonstrates that investors continue to rely upon state securities regulators. Enforcement remains one of our most fundamental responsibilities, if for no other reason, because no other regulator is going to act to protect hometown investors,” said Heath Abshure, NASAA President and Arkansas Securities Commissioner.

State securities regulators also took important investor protection actions by removing or barring unscrupulous brokers and investment advisers from the licensed community. In 2011, nearly 2,800 licenses were withdrawn due to state action, up 7.7 percent from the year before; and 774 licenses were denied, revoked, suspended or conditioned, up 20 percent from the previous year.

State-initiated enforcement actions resulted in more than $2.2 billion in investor restitution orders in 2011. Abshure noted that much of this restitution is attributable to repurchases of auction rate securities (ARS) stemming from state-led actions. State securities regulators also levied fines or penalties of $126 million.

The majority of the investment fraud cases reported by state securities regulators featured unregistered individuals selling unregistered securities. More than 800 reported actions involved unregistered securities, and more than 800 actions involved unregistered firms or individuals. For the second consecutive year, Regulation D Rule 506 private offerings and real estate investment schemes were the most reported products at the heart of state securities enforcement actions.

The report is based on the results of a survey of NASAA members during the spring of 2012. This year, 48 U.S. NASAA members responded to the survey, a response rate of 94 percent. The data, statistics and trends included in the report provide a general overview of state securities enforcement efforts. 


For more information:

Bob Webster, Director of Communications