State Regulators Are Off to the Races: Enforcement Actions on the Rise

adviser attorney nycEven before many mid-sized advisers made the switch to state oversight, local regulators were already ramping up their enforcement efforts. The number of enforcement actions doubled last year, signaling that the tougher regulatory environment is already causing problems for many advisers.

In 2011, states commenced about 400 state actions against investment advisory firms, compared to 208 in 2010, according to the North American Securities Administrators Association Inc. (NASAA).  The alleged misdeeds reportedly ranged from fraud to run-of-the-mill deficiencies.

The trend is expected to continue as states look to prove that they are up to the task of overseeing a larger pool of advisers. As highlighted by Missouri securities commissioner Matt Kitzi, chairman of NASAA’s enforcement section, state examinations in 2012 and beyond are certain to lead to even more enforcement actions.

“A lot of midsize advisers haven’t been examined by regulators in many years and, in some cases, not ever,” he said.

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