In 2017, more enforcement actions were taken against unregistered individuals or firms than registered members of the securities industry according to a new report from the North American Securities Administrators Association (NASAA).
In its 2018 Enforcement Report, NASAA said state securities regulators conducted 4,790 investigations in 2017 and took 2,105 enforcement actions overall. These actions resulted in more than $486 million in restitution returned to investors. The actions led to fines of $79 million and 1,985 years in jail or on probation.
The report reflects the first time in recent years that there were more actions against unregistered firms and individuals. Specifically, 675 of the actions were against unregistered firms and individuals, while 647 were against registered individuals and firms. Of the 377 enforcement actions against registered investment adviser firms and their representatives, 270 actions were against registered broker-dealer firms and their agents.
“The results from this year’s enforcement survey demonstrate that state securities regulators continue to play a critical role in protecting investors and holding securities law violators responsible for the damage that they cause to individual investors specifically and to the integrity of our capital markets in general,” NASAA President Michael Pieciak said.
The increase in enforcement against unregistered actors is due in part to a heightened focus on fraudulent initial coin offerings (ICOs) and other crypto-assets. Also, the growing enactment of state legislation based on NASAA’s Model Act to Protect Vulnerable Adults from Financial Exploitation has had an impact. This act requires reporting to a state securities regulator when there is reasonable belief that financial exploitation of an eligible adult has been attempted or has occurred.
NASAA also reported that licenses were revoked, barred or suspended from more than 300 individuals and firms in 2017.
“Securities fraud is a constant, ongoing, ever-evolving threat to investors. But as this year’s enforcement survey demonstrates, NASAA members are well-prepared, well-organized, and uniquely qualified to continue to aggressively protect investors,” Christopher Gerold, enforcement section chair at NASAA, said.