For First Time, Report Shows More Actions Brought Against Registered Securities Industry Members

WASHINGTON, D.C. (September 13, 2016) – The North American Securities Administrators Association (NASAA) today reported that for the first time since it has collected enforcement data, more registered members of the securities industry than nonregistered members were named in enforcement actions.

In its 2016 Enforcement Report on 2015 Data, which includes responses from 52 jurisdictions throughout the United States, NASAA reported that state securities regulators conducted 4,487 investigations in 2015 and took 2,074 enforcement actions. These actions led to more than $538 million in restitution ordered returned to investors, fines of $230 million and criminal relief of 1,282 years, including incarceration, probation and deferred prosecution.

States also continued to serve a vital function by screening bad actors before they have a chance to conduct business with unsuspecting investors. A total of 2,990 securities licenses were withdrawn in 2015 as a result of state action, and an additional 738 licenses were either denied, revoked, suspended or conditioned.

“The vigorous, fair and effective enforcement of state securities laws through formal administrative, civil and criminal actions is a critical priority for NASAA members,” said Mike Rothman, NASAA President and Minnesota Commerce Commissioner.

In a first, NASAA reported that its members in the United States brought enforcement actions against 812 registered industry members, compared to 791 unregistered members.

Laura Posner, NASAA Enforcement Section Chair and Chief of the New Jersey Bureau of Securities, attributed the increase in actions brought against registered securities industry members to enhanced regulatory scrutiny, and noted that the actions involved claims ranging from books and records violations, to failure to supervise, unsuitable sales, dishonest or unethical practices, unauthorized trading and fraud.

“Moving forward, it is essential that the industry take all necessary steps to protect their clients by ensuring compliance with both state and federal securities laws,” Posner said. “Given the large number of suitability and dishonest or unethical claims brought by state regulators in 2015, it is particular critical that broker-dealers put in place sufficient safeguards to ensure such practices do not continue.”

The report also identified and illustrated four enforcement priorities of state securities agencies. These include: Ponzi schemes, internet fraud, gate-keeper fraud, and senior fraud.

Rothman explained that gatekeeper fraud is particularly pernicious because of the violation of trust it represents. Intermediaries, or gatekeepers such as accountants or attorneys, are supposed to provide important services that benefit investors. “Unfortunately, state securities regulators often must take enforcement action against gatekeepers who abuse their position of trust to carry out investment fraud,” he said.

The complete enforcement report is available on the NASAA website here.

For more information:
Bob Webster | Director of Communications