U.S. state securities regulators say that unregistered advisors and illegal distributions continue to be their biggest enforcement issues.
The North American Securities Administrators Association (NASAA) published its annual enforcement survey Thursday, showing that state securities regulators conducted 5,865 investigations in 2012, which led to 2,496 criminal, administrative and civil enforcement actions. It also notes that 15% of state enforcement actions involved financial abuse of seniors; and that state actions led to 1,361 years in total prison time handed down to those convicted of violations.
State enforcement actions also resulted in nearly US$700 million in investor restitution orders in 2012, along with monetary penalties and costs in excess of US$157 million.
The majority of the investment fraud cases reported by state securities regulators continued to involve unregistered individuals selling unregistered securities, NASAA says. And, it notes that states reported 580 actions involving unregistered securities and 576 actions involving unregistered firms or individuals during the year. Also, for the third consecutive year, private offerings were the products most often at the heart of state enforcement actions.
The report also highlights emerging enforcement trends, including the increased presence of questionable securities offerings made through the Internet. Other problem areas include affinity fraud, gold and precious metals, annuities, real estate investment trusts and foreign currency trading programs, it says.
NASAA also reports that the number of broker and investment adviser licenses withdrawn due to state enforcement actions increased by 27% to 3,564 during the year. Although, the jump comes after 2,100 investment advisers transitioned from federal to state oversight as mandated by the U.S. regulatory reform known as Dodd-Frank.
“Closer scrutiny of licensing applications has resulted in a noticeable increase in the number of licensing withdrawals in the past year,” said Andrea Seidt, NASAA president and Ohio Securities Commissioner.
“Our survey shows several important trends in investor protection and securities regulation, including continued investor reliance on state regulators to address both traditional areas of securities fraud and emerging issues,” she adds.