State regulators reveal top enforcement targets and the price they pay
Agencies brought more cases against registered advisers than unregistered entities, and certain products featured in many of them
By Mark Schoeff Jr. of investmentnews.com
For the first time since they’ve been keeping enforcement statistics, state regulators last year brought more cases against registered financial advisers than against unregistered entities.
In its 2015 enforcement report, the North American Securities Administrators Association said 812 registered advisers were named as respondents in cases, compared to 791 unregistered individuals and firms. Overall, state regulators opened 4,487 investigations last year and took 2,074 enforcement actions, according to the report, which was released at the NASAA annual conference in Providence, R.I.
The states ordered $538 million in restitution to investors and levied $230 million in penalties and fines. They also made respondents pay $18 million in court costs and contribute $11 million to investor education initiatives.
Enforcement actions by state regulators also resulted collectively in 1,200 years of incarceration, probation and deferred adjudication. They also revoked 250 adviser licenses and denied 475 others, while 2,990 registrations were withdrawn due to enforcement actions
The products that generated the most enforcement were real estate and oil and gas investment programs. Other products that were at the center of investigations included variable and fixed-indexed annuities, hedge funds, life settlements/viaticals and structured products. State regulators expect more problems as investors chase yield.
“With interest rates expected to remain low — putting increased financial pressure on many Americans — the growing complexity of financial products and markets, and the increasing frequency of investment scams (many of which target our most vulnerable seniors), vigilance by regulators is essential,” Laura Posner, chief of the New Jersey Bureau of Securities and chair of the NASAA enforcement section, wrote in the introduction to the report.
Ponzi schemes remain the most popular way to rip off investors, with online and affinity fraud also ranking highly.
The most popular victims were the elderly, with one-third of state investigations involving that group.
“Vulnerable adults, particularly senior investors, were again disproportionately targeted by fraudsters,” the report states.
The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.