NASAA Enforcement Report Details the Investor Protection Role of State Securities Regulators

NASAA has released an enforcement survey which reports a significant rise in the number of licenses of "unscrupulous" stockbrokers and investment advisers withdrawn due to state action.

According to the report, the number of licenses withdrawn due to state enforcement actions increased by 27 percent - from 2,796 to 3,564. NASAA stated that the increase is attributable in part to the completion of the transition of 2,100 investment advisers who switched from federal to state oversight as mandated by Dodd-Frank.

Overall, the report showed that state securities regulators conducted 5,865 investigations in 2012, leading to almost 2,500 enforcement actions. The report noted that 15 percent of those state enforcement actions involved the financial abuse of seniors, and that prison time resulting from the actions totaled 1,360 years.

The majority of the investment fraud cases reported by state securities regulators continued to involve unregistered individuals selling unregistered securities. Additionally, for the third consecutive year, Regulation D Rule 506 ("Exemption for Limited Offers and Sales without Regard to Dollar Amount of Offering") private offerings were the most reported products at the heart of state securities enforcement actions. Other reported problem areas included securities offerings made through the Internet, affinity fraud, gold and precious metals, and foreign currency trading programs.

See: NASAA Enforcement 2013 Report on 2012 Data; NASAA Press Release. Related news: NASAA Reports on Deficiencies among State-Registered Investment Advisers (October 10, 2013).