Securities Regulator News: NASAA Offers Guide to Protecting Senior Investors and other Vulnerable Adults, States Disclose 2015 Enforcement Statistics, and SEC to Scrutinize Firms With Rogue Brokers 

NASAA Puts Out Practices and Procedures Guide to Protect Vulnerable Adults

The North American Securities Administrators Association has issued a guide to help investment advisory firms and broker-dealers create procedures and practices to help them identify and tackle suspected incidents of financial exploitation involving vulnerable adult clients, including senior investors and adults with diminished capacity. The guide provides steps that revolve around five key concepts:

  • Identifying who is a vulnerable individual
  • Governmental reporting
  • Third-party reporting
  • Delaying disbursement from the account of a client who is a vulnerable adult
  • Ongoing regulator cooperation when a disbursement is delayed or a report of suspected financial exploitation is made.

It was just recently that NASAA put into effect its Model Act to Protect Vulnerable Adults from Financial Exploitation and this guide is a companion to the act.

If you are an elderly investor or a vulnerable adult who has suffered losses due to fraud, call our senior financial fraud law firm today.

State Regulator Bring Cases Against 812 Registered Advisers in 2015

According to NASAA’s 2015 enforcement report, state regulators brought cases against 812 registered advisers last year and 791 unregistered firms and persons. This is the first time since the states have kept track that more cases were brought against registered advisers than advisers who were not registered.

The reported said that, in total, state regulators brought 4,487 probes in 2015 and initiated more than 2,070 enforcement actions.  They ordered $538M in restitution to be paid to investors and imposed $230M in fines and penalties.

Other statistics:

  • Respondents were told to contribute $11M to education initiatives for investors.
  • Nearly 1300 collective years of incarceration, deferred adjudication, and incarceration resulted from the enforcement actions.
  • Real estate investments and oil and gas investments led to the most enforcement actions.
  • Hedge funds, fixed-indexed annuities, variable annuities, structured products, viaticals, and life settlements were involved in a number of the enforcement cases.
  • 2,990 registrations were withdrawn.
  • 250 adviser licenses were taken away.
  • 275 adviser licenses were denied.
  • Elderly investors remained the most popular target of fraud.
  • Ponzi schemes, affinity fraud, and online fraud are still among the favorite scams employed by scammers.

SEC Will Closely Scrutinize Firms That Hire Advisers with Disciplinary Histories

The Securities and Exchange Commission’s Office of Compliance Inspections and Examinations said that it would be closely watching firms who hire advisers who have a rogue past. The regulator wants to make sure that these individuals are now under proper supervision.  OCIE staff will examine these registered investment advisors, and look at their compliance programs and supervisory practices and their disclosure practices. In a Risk Alert, OCIE noted that advisers who already have a disciplinary past might be at greater risk of misconduct down the road.

In 2014, it was the Financial Industry Regulatory Authority that announced that it would be taking more action to monitor and stop rogue brokers from causing more harm. Rogue brokers are known as serial offenders who continue to work in the industry despite numerous customer complaints. They seem to find a way to move from one firm to the next even with their disciplinary pasts.

Shepherd Smith Edwards and Kantas represents investors that have been victimized by broker fraud or investment adviser fraud.

The NASAA Guide for Protecting Seniors and Vulnerable Adults 

2016 NASAA Enforcement Report Based on 2015 Data (PDF)

Examinations of Supervision Practices at Registered Investment Advisers, SEC, September 12, 2016 (PDF)