State Regulators Brought More Cases Against Registered Advisers Than Unregistered Entities

This week, the North American Securities Administrators Association released its enforcement statistics on state regulators. The state regulators last year brought more cases against registered financial advisers than against unregistered entities. From 2015, the report stated that 812 registered advisers were named as respondents in cases, while only 791 unregistered individuals and firms were named as respondents. The states ordered $538 million in restitution to investors and levied $230 million in penalties and fines. They made respondents pay $18 million in court costs and contribute $11 million to investor education initiatives. Enforcement actions resulted collectively in 1,200 years of incarceration, probation and deferred adjudication. 250 adviser licenses were revoked and 475 were denied, while 2,990 registrations were withdrawn.

At the center of most of these investigations were real estate products and oil and gas investment programs. Others included variable and fixed-indexed annuities, hedge funds, life settlements/viaticals and structured products. The most popular victims were the elderly, with one-third of state investigations involving that group. Vulnerable adults were disproportionately targeted by fraudsters.