Enforcement actions by state securities regulators last year resulted in $42 million in fines, $306 million in restitution and 632 years of prison time, according to the North American Securities Administrators Association (NAASA).
State regulators brought an increasing number of investigations and enforcement actions in a variety of areas, with promissory notes, equities, social media, digital assets, precious metals and self-directed individual retirement accounts topping the list of violations, the organization said in a report released today.
NASAA reported that state securities regulators opened 5,501 new investigations and continued to work on 2,572 ongoing investigations for a total of 8,073 investigations conducted in 2020. Of those, state securities regulators took 2,202 enforcement actions in 2020, the organization said.
“State securities regulators are at the forefront in the ongoing fight against financial exploitation and investment fraud. This report shows that state enforcement activity remained strong in 2020 despite the challenges of the Covid-19 pandemic,” NASAA President Melanie Senter Lubin said in a statement.
The findings “show a tremendous commitment of resources put toward stopping schemes tied to precious metals and other commodities, digital assets, and internet and social media fraud that spread during the pandemic," Joseph P. Borg, co-chair of NASAA’s enforcement section, said. "For example, states reported a tripling of enforcement actions involving digital assets and almost twice as many cases involving bad actors using self-directed individual retirement accounts.”
State regulators not only initiated 5,501 overall enforcement actions, they brought 2,202 administrative, 1,788 civil and 126 criminal actions.
Registered investment advisors outpaced broker-dealers when it came to state enforcement actions, according to the findings. Regulators reported actions against 497 registered parties, including 153 investment advisors, 115 investment advisor reps, 110 broker-dealer firms and 119 broker-dealer agents, NAASA said.
State securities regulators also took actions against unlicensed actors and unregistered schemes. For 2020, state securities regulators brought 619 enforcement actions against unregistered parties.
“States continue to serve a vital gatekeeper function for U.S. capital markets by screening out bad actors before they have a chance to conduct business with unsuspecting investors,” the group said.
“In 2020, more than 3,600 license/registration applications were withdrawn after state action. In many cases, applicants withdraw their candidacy for licenses or registrations due to state investigations or forthcoming actions to deny, suspend or revoke their applications. In addition to the license withdrawals, state securities regulators also work to ensure compliance within the licensed securities industry. In 2020, state securities regulators imposed approximately 801 other licensing sanctions upon individuals and firms,” NASAA reported.
Some 32 states with laws or regulation to protect seniors and vulnerable adults said they received 1,102 reports from broker-dealers and investment advisors about possible financial fraud and abuse, a 55% increase from the year before. The reports resulted in 245 investigations, 139 delayed disbursements and 65 enforcement actions in 2020. Overall, states reported taking 290 enforcement actions involving 1,017 seniors or vulnerable victims.