You’re Outta Here: Big Jump in Advisors Barred by States

The number of advisors barred by state securities regulators jumped significantly in 2012, with 3,564 licenses being withdrawn — a 27% increase over the 2,796 withdrawn in 2011—and 736 licenses were denied, revoked, suspended or conditioned.

The increase is attributable “in part” to the completion of the switching of a 2,100 advisors from federal to state registration as mandated by the Dodd-Frank Act, according to the North American Securities Administrators Association’s annual enforcement survey.

The report is based on the results of a survey of NASAA members during spring 2013. This year, 49 of 51 U.S. state and district regulators responded to the survey.

Andrea Seidt, NASAA president and Ohio securities commissioner, said in releasing the data that “closer scrutiny of licensing applications resulted in a noticeable increase in the number of licensing withdrawals in the past year.” They 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.”

NASAA noted the “marked increase” in interagency coordination during the 2012 reporting period, with 770 outgoing referrals from state securities regulators to other regulators and law enforcement agencies and 604 incoming referrals to state securities regulators from other agencies.

The majority of the investment fraud cases reported by state securities regulators continued to involve unregistered individuals selling unregistered securities, the report said. States reported 580 actions involving unregistered securities and 576 actions involving unregistered firms or individuals.

Other notable findings from 2012 include:

• State securities regulators received 10,272 complaints from aggrieved investors and conducted 5,865 investigations in the 2012 reporting period.