compliance puzzle

U.S. state securities regulators ramped up their enforcement activity last year, according to a new report from the North American Securities Administrators Association (NASAA).

The umbrella group of U.S. state and Canadian provincial regulators issued a report that showed a 23% year-over-year increase in the number of investigations carried out by state regulators in 2019, and a 33% jump in enforcement actions.

Collectively, these enforcement actions generated US$634 million in restitution ordered for investors, US$80 million in fines, and a combined 956 years of prison time and probation, the report showed.

“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, president of NASAA and senior deputy securities commissioner for West Virginia.

More than 1,200 enforcement actions were taken against registered firms and individuals in 2019, with another 738 cases brought against unregistered people and companies.

Additionally, NASAA reported that more than 4,800 registration applications were withdrawn in 2019, up from 4,500 withdrawals in 2018.

The report noted that registration withdrawals often reflect regulators’ efforts to prevent “bad actors” from entering the industry.

“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,” it said.

NASAA also reported a sharp increase in actions taken in response to suspected exploitation of vulnerable investors.

In the 28 states that have adopted rules or legislation mandating industry reporting of suspected financial exploitation, reports from broker-dealers and investment advisers jumped by 66% last year

In turn, these reports resulted in 233 investigations, 92 delayed disbursements, and 15 enforcement actions, NASAA said.