WASHINGTON, D.C. (September 23, 2020) – The North American Securities Administrators Association (NASAA) today released its annual enforcement report, which shows increasing numbers of investigations and enforcement actions taken by state securities regulators to protect investors and maintain the integrity of the nation’s financial markets.
In its 2020 Enforcement Report on 2019 Data, which includes responses from 51 jurisdictions throughout the United States, NASAA reported that state securities regulators conducted 6,525 investigations in 2019, up 23 percent from the year before, and took 2,755 enforcement actions, up 33 percent from 2018. These actions led to $634 million in restitution ordered returned to investors, fines of $80 million and criminal relief of 956 years, including incarceration and probation.
“State securities regulators are on the front lines in the fight against financial exploitation and investment fraud. This report reflects the responsive and effective actions taken by NASAA members against a wide variety of actors who seek to do harm to Main Street investors,” said Lisa Hopkins, NASAA President and West Virginia Senior Deputy Securities Commissioner.
“NASAA and its members recognize the challenges facing investors amid an ever-increasingly complex saving and investing marketplace and will continue to work to make sure they are treated fairly,” said Joseph P. Borg, Director of the Alabama Securities Commission and Chair of NASAA’s Enforcement Section.
Within the licensed securities industry, state securities regulators reported actions against 1,218 registered parties, including 200 broker-dealer firms, 391 broker-dealer agents, 193 investment advisers and 434 investment adviser representatives. State securities regulators also take actions to protect the public from unlicensed actors and unregistered schemes. In 2019, state securities regulators reported an increase in the number of cases brought against unregistered parties. Actions against unregistered actors totaled 738 in 2019, a 15 percent increase from the year before.
State securities regulators continued to take strong steps to prevent bad actors from operating within the licensed securities industry, and to limit the activity of licensees and registrants when warranted. In 2019, more than 4,800 license/registration applications were withdrawn as a result of state action or attention, a slight increase from approximately 4,500 withdrawals reported during 2018. This information is indicative of the measures regulators take to prevent bad actors from entering the market. In many cases, applicants withdraw their candidacy for licenses or registrations due to state investigations or forthcoming actions to deny, suspend or revoke their applications.
The report also demonstrates the growing effectiveness of state legislation or rules based on NASAA’s Model Act to Protect Vulnerable Adults from Financial Exploitation. To date, 28 jurisdictions have enacted rules or legislation based on the NASAA model act. The model act mandates reporting to a state securities regulator and state adult protective services agency when an agent or representative has a reasonable belief that financial exploitation of an eligible adult has been attempted or has occurred. Of the 28 states with laws based on the NASAA model act, 18 reported receiving 709 reports from broker-dealers and investment advisers, a 66 percent increase from the year before. These reports resulted in 233 investigations, 92 delayed disbursements, and 15 enforcement actions in 2019.
The full report is available on the NASAA website, here.
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Bob Webster | Director of Communications
Noelle Lane | Communications & Outreach Specialist