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NASAA: States Doled Out $579M in Enforcement Penalties in 2014

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Investigations and enforcement actions performed by state securities regulators in 2014 resulted in $405 million in restitution to investors — mostly elderly investors — as well as $174 million in fines and prison sentences of 1,629 years.

Those figures were released Tuesday by the North American Securities Administrators Association as part of its 2015 Enforcement Report on 2014 Data.

The report, which includes responses from 49 jurisdictions throughout the United States, found that frauds targeting seniors were the focus of one-quarter of the enforcement actions taken in 2014 by states that track victims by age. “This number is conservative, in part, because of a reluctance by victims to approach authorities,” said William Beatty, NASAA president and Washington Securities Director, in releasing the report, adding that senior-related cases typically involved an average of three senior victims per case.

Unregistered securities, in the form of promissory notes, private offerings or investment contracts continue to be the most common product involved in senior abuse cases, the report states.

Affinity fraud and unregistered securities scams disproportionately affect seniors, the report states, with more than half of all reported enforcement actions that involved a senior victim featuring unregistered securities.

The majority of frauds were perpetrated by unregistered individuals selling unregistered securities. Of the 746 reported cases of fraud, 484 involved unregistered securities and 675 actions involved unregistered firms or individuals.

A total of 746 reported actions involved unregistered individuals and unregistered firms — 230 broker-dealer agents, 156 BD firms, 190 investment advisors and 146 investment advisor firms.

The top products or schemes involved in enforcement investigations (in order of frequency) were: Ponzi schemes; Regulation D 506 (smal private placement) offerings; real estate investments, including promissory notes; Internet fraud, including social media and crowdfunding; and oil and gas offerings.

State securities regulators also withdrew a total of 2,857 securities licenses as a result of state action, and an additional 728 licenses were either denied, revoked, suspended or conditioned.

— Check out 5 New Compliance Headaches for Advisors, BDs on ThinkAdvisor.


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