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Regulation and Compliance > State Regulation > NASAA

State securities enforcement grows

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WASHINGTON — State securities regulators said recently that for the first time since it collected enforcement data, its members imposed more enforcement actions against registered members of the securities industry than nonregistered members.

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In its enforcement report for 2015, the North American Securities Administrators Association (NASAA) said its members in the U.S. brought enforcement actions against 812 registered industry members, compared to 791 unregistered members.

The report found that NASAA took 2,074 enforcement actions. These actions led to more than $538 million in restitution ordered returned to investors, fines of $230 million and criminal relief of 1,282 years, including incarceration, probation and deferred prosecution.

State regulators were also more pre-emptive by screening bad actors before they have a chance to conduct business with unsuspecting investors, the report found. A total of 2,990 securities licenses were withdrawn in 2015 as a result of state action, and an additional 738 licenses were either denied, revoked, suspended or conditioned, NASAA officials said.

Laura Posner, NASAA enforcement section head and chief of the New Jersey Bureau of Securities, attributed the increase in actions brought against registered securities industry members to enhanced regulatory scrutiny, and noted that the actions involved claims ranging from books and records violations, to failure to supervise, unsuitable sales, dishonest or unethical practices, unauthorized trading and fraud.

 “Moving forward, it is essential that the industry take all necessary steps to protect their clients by ensuring compliance with both state and federal securities laws,” Posner said.  “Given the large number of suitability and dishonest or unethical claims brought by state regulators in 2015, it is particular critical that broker-dealers put in place sufficient safeguards to ensure such practices do not continue.”

See also: A focus on compliance in a changing health care world

The report also identified and illustrated four enforcement priorities of state securities agencies. These include: Ponzi schemes, internet fraud, gate-keeper fraud, and senior fraud, “The vigorous, fair and effective enforcement of state securities laws through formal administrative, civil and criminal actions is a critical priority for NASAA members,” said Mike Rothman, NASAA president and Minnesota Commerce commissioner.

Rothman explained that gatekeeper fraud is particularly pernicious because of the violation of trust it represents. Intermediaries, or gatekeepers such as accountants or attorneys, are supposed to provide important services that benefit investors.

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