Securities enforcement activity by U.S. state regulators declined in 2013, according to data released Tuesday by the North American Securities Administrators Association (NASAA).
The results of its latest survey of U.S. state regulators show that state regulators received 9,693 complaints, and conducted 5,302 investigations, in the 2013 reporting period. However, the total number of enforcement actions by state regulators declined to less than 2,200 for the year, down from 2,500 in the previous year; and, almost 3,500 back in 2010. The prevalence of administrative, civil and criminal actions all declined from the previous year. (The data doesn’t include NASAA’s Canadian members, which do their own enforcement reporting.)
The total amount of monetary fines, penalties and disgorgement ordered also declined year over year. For 2013, state regulators ordered $616 million in restitution, down from almost $700 million last year, and over $2 billion the year before that. Fines and penalties dropped from $115 million in 2012 to $71 million in 2013. And, costs recovered plunged to just $4 million in 2013, from $42 million in 2012.
The number of licenses withdrawn by state regulators dropped to less than 2,500 in 2013, from more than 3,500 in 2012. One area that saw a notable rise is the number of licenses denied, revoked, suspended, or placed under terms and conditions; which rose to 1,159 in 2013 from 736 in 2012.
The states also reported an increase in the sentences imposed in criminal actions; which, they say, resulted in over 1,800 years of incarceration and 679 years of probation. The average incarceration term was 66 months.
The regulators report that unregistered securities and unregistered reps continue to be the most common problem they face; accounting for 810 enforcement actions, up 34% from a year ago. They also say they saw an increase in enforcement actions involving broker dealers’ sales reps; up 89% from a year ago to 357 cases. Enforcement cases against investment adviser reps only increased 11% year over year.
“While the majority of enforcement actions handled by state securities regulators involve unlicensed individuals, the primary source of criminal activity in the financial markets, we also serve an important investor protection role through our oversight of the licensed financial professionals investors entrust with their money,” said William Beatty, NASAA’s current president and Washington Securities Director, said in a release.
Classic threats, such as Ponzi schemes, are morphing into new dangers fueled by the Internet, the report notes; adding that new risks, such as the security breach of a digital currency site, and the use of the Internet to facilitate the sale of stream-of-income investments and marijuana industry-related investments, are also emerging.