RIA Compliance and Practice Management Blog

NASAA releases 2022 enforcement report

Posted by RIA in a Box

Sep 29, 2022 2:00:46 PM

www.riainabox.comhubfsNASAA_Enforcement Cases-Dec-15-2020-09-26-16-72-PM

On Sept. 20, 2022, the North American Securities Administrators Association (NASAA) released its 2022 enforcement report. Based on 2021 enforcement efforts, the report analyzes and identifies trends, market developments and rising public threats.

As compliance consultants to registered investment adviser (RIA) firms, we recommend the chief compliance officer (CCO) of all investment advisory firms review the enforcement report to determine if any changes should be implemented at their firm due to NASAA's findings.

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NASAA shares how state securities regulators investigated 7,029 cases, which led to 1,661 enforcement actions.

An overview of findings uncovered in the 2022 report included:

  • $312,097,734 in restitution was ordered to be paid to investors.
  • $145,567,334 in fines.
  • In 2021, investors reported a 34% increase in tips and complaints compared to 2020 data.

Findings related specifically to investment advisers and representatives:

  • 478 new investigations were opened for investment advisers and representatives.
  • 267 enforcement actions were filed against investment advisers and representatives.
  • Most enforcement actions addressed matters related to supervision, books and records, suitability, unauthorized or excessive trading.

The data also revealed notable market changes, such as increased use of illegal social media marketing for investment products, a surge of investor interest in digital assets and a rise in real estate schemes. NASAA reported an increase of approximately 70% more investigations related to suspected digital asset schemes than in 2020.

NASAA's findings show a 35% increase in reports for suspected exploitation of elderly or vulnerable clients. The organization credits the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation as a critical component of enhancing senior protection.

Promissory notes are listed as the top threat to retail investors in 2023. It is clear regulators will continue to pursue those who sell and promote promises to pay fixed returns to investors on a fixed date.

As we mentioned above, CCO's should read the entire enforcement action report and update their compliance programs accordingly. RIAs can also use this report to better understand areas of their employee training programs, which may need to be strengthened, such as learning how to properly identify and report suspected elderly exploitation. 

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Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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