The latest data reinforces the critical role of securities regulators in protecting investors from fraud and financial abuse.
DOWNLOAD: 2022 Enforcement Report on 2021 data.
WASHINGTON, D.C. (September 20, 2022) – The North American Securities Administrators Association (NASAA) today released its annual Enforcement Report, highlighting investigations and enforcement actions taken by state securities regulators to protect investors and maintain the integrity of the nation’s financial markets.
In its 2022 Enforcement Report on 2021 data, which includes responses from 48 of NASAA’s U.S. member jurisdictions, NASAA reported that state securities regulators opened 5,337 new investigations and continued to work on 1,692 ongoing investigations for a total of 7,029 investigations conducted in 2021. Of those 7,029 investigations, state securities regulators took 1,661 enforcement actions. These actions led to $312 million in restitution ordered to be returned to investors, fines of more than $145 million, and criminal relief of more than 735 years including incarceration and community supervision.
“As the cops on the beat, state securities regulators continued their decades-long work to fight financial exploitation and investment fraud. This year’s enforcement report demonstrates that NASAA members continue to investigate complaints and pursue wrongdoers using all the tools at their disposal to address misconduct,” said Andrew Hartnett, NASAA President and Iowa Insurance Division Deputy Administrator for Securities.
Within the licensed securities industry, regulators reported opening investigations against 1,156 registered parties, including 678 broker-dealer firms and agents, and 478 investment advisers and representatives. State securities regulators also took action to protect the public from unlicensed actors and unregistered schemes. In 2021, state securities regulators reported the denial of 232 individual applications for licensure, an increase of 76% from 2020, and 278 conditional approvals for licensure, a 67% increase from 2020. They also revoked the licenses of 50 securities professionals and barred 61 individuals from the industry
“Amid the rapidly changing investing and savings marketplace, investors are facing increasing challenges in protecting their assets from fraud and abuse,” said Joseph P. Borg, Director of the Alabama Securities Commission and 2021-2022 Chair of NASAA’s Enforcement Section Committee. “NASAA and its members will continue to work to push regulatory efforts and face those challenges head-on to ensure all investors are treated fairly.”
“The COVID-19 pandemic presented significant challenges, restricting access to many courts and preventing the use of many traditional investigative techniques. Although these limitations resulted in the reporting of lower enforcement numbers in some areas, the data also shows state securities regulators overcame many challenges and continued to protect the public during the pandemic,” added Borg.
State securities regulators continued to fulfill critical gatekeeping functions in their effort to prevent bad actors from operating within the licensed securities industry, and to limit the activity of licensees and registrants when warranted. In 2021, more than 4,800 individual license/registration applications were withdrawn as a result of state action or attention, a 33% increase from approximately 3,600 withdrawals reported during 2020. The data is indicative of their important gatekeeping role in preventing bad actors from entering the market. Although they file enforcement actions to revoke or deny licensure, many applicants also withdraw their candidacy for licenses or registrations due to state investigations or forthcoming actions to deny, suspend or revoke their applications.
“NASAA members’ work demonstrates that state securities regulators are uniquely positioned to act swiftly to protect all investors – including retirees, older citizens and other vulnerable victims,” said Joseph Rotunda, Enforcement Director of the Texas State Securities Board and Vice-Chair of NASAA’s Enforcement Section Committee.
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, 34 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. In 2021, U.S. members reported the receipt of 1,428 reports of suspected exploitation – an increase of 35% from 2020 and 118% from 2019 – and opened 356 investigations – an increase of 57% from 2020 and an increase of 98% from 2019. They also filed 54 enforcement actions based on the information provided by financial services professionals.
Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. NASAA is a voluntary association whose membership consists of securities regulators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the 13 provincial and territorial securities regulators in Canada, and the securities regulator in México. For more information, visit www.nasaa.org.
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Jeanne Hamrick | Director of Communications
Karen Grajales | Communications & Investor Outreach Manager