NASAA Reports Downward Trend in Enforcement Actions

There were several interesting presentations at the most recent SEC Advisory Committee on Small and Emerging Companies (ACSEC) meeting last month.  One of the reports came from the North American Securities Administrators Association (NASAA) – the group that represents and lobbies on behalf of state securities regulators. While the feds typically are engaged in the high profile cases regarding securities fraud and other malfeasant acts, the state regulators play an important role at the state level in enforcing and pursuing the actions of individuals that transgress securities laws. These “boots on the ground” regulators can frequently be the first line of defense against individuals trying to separate honest money using nefarious or dubious actions.

Reporting at ACSEC, Michael Pieciak (a non-voting member), who is the Deputy Commissioner of the Vermont Securities Division and represents NASAA at these meetings, shared information from NASAA members indicating there has been a downward trend in enforcement actions at the state level.

Reporting on enforcement actions, Pieciak said that members brought over 2,000 enforcement actions in 2015. Most of the enforcement actions were brought administratively, as opposed to in a civil court. This is a decline from 2010 where approximately 3500 enforcement actions were taken. For 2016, the number of enforcement actions were about the same.

Regarding restitution in the form of penalties, Pieciak said there was a significant uptick from 2015 to 2016 from $405 million to $538 million.

Asked specifically if cases of fraud were going up or if enforcement was just more aggressive. Pieciak was inconclusive saying based on the number of investigations and enforcement actions it would not tell if fraud was on the increase or not.

Regarding types of frauds, Ponzi schemes got the top spot followed by internet fraud and affinity fraud.  Elder fraud remains a persistent challenge as the most recent data indicated that one third of investigations involved a senior victim.

Pieciak said that NASAA was going to be looking more closely is Reg A+ and Reg CF crowdfunding. Reg A+ became actionable in May 2016.

The entire transcript of the ASCE meeting from this past May is available here.

The NASAA Enforcement Report from 2016  covering 2015 data is embedded below.

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