NASAA touts U.S. state enforcement efforts

Despite operating in the shadow of the U.S. Securities and Exchange Commission (SEC), U.S. state securities regulators brought thousands of enforcement cases and imposed hundreds of millions of dollars in sanctions for regulatory misconduct last year.

The North American Securities Administrators Association (NASAA), which includes U.S. state and Canadian provincial regulators, released its latest annual enforcement report, covering the work of its U.S. members.

That report showed that state regulators carried out over 7,000 regulatory investigations in 2021, comprised of 5,337 new investigations and 1,692 ongoing cases, which generated a combined 1,661 enforcement actions.

The state regulators’ actions led to US$312 million in restitution orders, and more than US$145 million in monetary penalties.

These cases also produced criminal sanctions of more than 735 years in jail terms and community supervision.

“As the cops on the beat, state securities regulators continued their decades-long work to fight financial exploitation and investment fraud,” said Andrew Hartnett, NASAA’s new president and Iowa Insurance Division’s deputy administrator for securities, in a release.

These enforcement efforts included actions against unregistered investment schemes and firms, and investigations against 1,156 registered firms and reps, NASAA reported. Of those investigations, 678 were in the broker-dealer sector and 478 involved investment adviser firms and reps.

“The Covid-19 pandemic presented significant challenges, restricting access to many courts and preventing the use of many traditional investigative techniques,” said Joseph Borg, chair of NASAA’s enforcement committee and director of the Alabama Securities Commission.

“Although these limitations resulted in the reporting of lower enforcement numbers in some areas, the data also shows state securities regulators overcame many challenges and continued to protect the public during the pandemic,” he added.

Separately, in his first remarks as NASAA’s new president, Hartnett said that the group is expected to keep working with lawmakers and other regulators on regulation for the crypto sector, to focus on the implementation of the SEC’s best interest rules, and to undertake projects aimed at combatting fraud against older investors in the year ahead.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.