State securities regulators collected nearly $1 billion from enforcement actions in 2022, the North American Securities Administrators Association (NASAA) reported today.

The fines and penalties include $702 million in restitution and more than $223 million in fines, as well as about 5,337 months in prison sentences and 9,520 months of probation for those in violation of securities laws. The 8,538 cases state regulators initiated are up from 7,029 cases reported in 2021, said Joseph Rotunda, vice-chair of NASAA’s Enforcement Section Committee, during a press conference today.

“State regulators are doing what they can and doing what is necessary to protect the public and identify problems before they gain critical mass,” said Rotunda, who is director of the Enforcement Division of the Texas State Securities Board.

State regulators reported conducting nearly 1,000 investigations of registered parties, including 522 investigations of broker-dealers and agents and 422 investigations of investment advisors and investment advisor representatives.

Although they opened more investigations of broker-dealers and agents, state regulators filed a greater number of enforcement actions against investment advisors and investment advisor representatives (271) than they brought against broker-dealers and agents (98), NASAA said. The most commonly cited violations in enforcement actions were books and records (53), supervision (43) and cybersecurity (13), the regulatory association said.

“[State regulators] revoked 57 licenses, barred 63 individuals and 31 firms from the industry, and suspended the licenses of an additional 42 registrants," NASAA said. "U.S. NASAA members also denied slightly more than 600 license applications—the highest number of such actions in recent years."

State enforcement actions, much like state investigations, trended toward technology, Rotunda said. In 2021, state securities regulators reported filing more enforcement actions involving promissory notes (161) than any other products. In 2022, however, state securities regulators reported filing more enforcement actions involving investments tied to digital assets (125)—an increase of almost 30% from the previous year, NASAA said.

“The number one scam this year is cryptocurrencies, which is not too big a surprise," Rotunda said. "It was number nine in 2019."

There was also an increase in the number of investigations involving social media and internet scams in 2022, with 172 cases opened, compared to 127 in 2021.

Social media and digital asset schemes also topped the list of scams targeting older investors, Rotunda said. In 2022, state regulators opened 680 investigations and filed 133 enforcement actions involving at least one older investor. 

Artificial intelligence is also a major concern of regulators in 2024. Some 44% of state regulators said they expect to see many schemes involving AI and 33% expect AI to become the top threat to investors this year, Rotunda said.

“It is critically important that investors feel safe when they are investing their hard-earned money and have trust in the public markets,” said Claire McHenry, NASAA president and deputy director of the Nebraska Department of Banking and Finance.