WASHINGTON, D.C. (September 29, 2021) – 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 involving digital assets, precious metals, social media, and self-directed individual retirement accounts to protect investors and maintain the integrity of the nation’s financial markets in 2020.
In its 2021 Enforcement Report on 2020 Data, which includes responses from 50 jurisdictions throughout the United States, NASAA reported that state securities regulators opened 5,501 new investigations and continued to work on 2,572 ongoing investigations for a total of 8,073 investigations conducted in 2020. Of those, 8.073 investigations, state securities regulators took 2,202 enforcement actions in 2020.
These actions led to $306 million in restitution ordered returned to investors, fines of $42 million and criminal relief of 919 years, including incarceration and probation. The full report is available on the NASAA website, here.
“State securities regulators are at the forefront in the ongoing fight against financial exploitation and investment fraud. This report shows that state enforcement activity remained strong in 2020 despite the challenges of the COVID-19 pandemic,” said Melanie Senter Lubin, NASAA President and Maryland Securities Commissioner.
“The data in this year’s report show a tremendous commitment of resources put toward stopping schemes tied to precious metals and other commodities, digital assets, and internet and social media fraud that spread during the pandemic. For example, states reported a tripling of enforcement actions involving digital assets and almost twice as many cases involving bad actors using self-directed individual retirement accounts,” said Joseph P. Borg, Director of the Alabama Securities Commission and Co-Chair of NASAA’s Enforcement Section.
Within the licensed securities industry, state securities regulators reported actions against 497 registered parties, including 153 investment advisers, 115 investment adviser representatives, 110 broker-dealer firms and 119 broker-dealer agents. State securities regulators also take actions to protect the public from unlicensed actors and unregistered schemes. For the 2020 reporting year, state securities regulators brought 619 enforcement actions against unregistered parties.
States continue to serve a vital gatekeeper function for U.S. capital markets by screening out bad actors before they have a chance to conduct business with unsuspecting investors. In 2020, more than 3,600 license/registration applications were withdrawn after state action. 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. In addition to the license withdrawals, state securities regulators also work to ensure compliance within the licensed securities industry. In 2020, state securities regulators imposed approximately 801 other licensing sanctions upon individuals and firms.
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, 32 jurisdictions have enacted rules or legislation based on the NASAA model act, which 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 these 32 states, 24 reported receiving 1,102 reports from broker-dealers and investment advisers, a 55 percent increase from the year before. These reports resulted in 245 investigations, 139 delayed disbursements, and 65 enforcement actions in 2020. Overall, states reported taking 290 enforcement actions involving 1,017 victims.
Formed in 1919, NASAA is a nonprofit association of state, provincial and territorial securities regulators in the United States, Canada and Mexico. NASAA has 67 members, including the securities regulators in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands with a shared mission of protecting investors from fraud and abuse in the offer and sale of securities. For more information, visit: www.nasaa.org.
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Jeanne Hamrick | Director of Communications
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