By Patrica Uceda, Fall 2014 Graduate Research Assistant
In its 2014 enforcement report on 2013 data, NASAA found that state securities regulators continue to report unregistered securities and unregistered investment professionals as the most common problem they face.
In 2013, a total of 169 licenses were denied due to state action, which was a 39% increase in denials from 2012. This shows a continued effort to keep unqualified persons out of the industry. In addition, 394 licenses were conditioned, which usually results when an offender is allowed to re-enter the industry but only under heightened supervision.
Despite the increased level of denials and conditioned licenses, unregistered investment professionals continue to be a problem. In 2013 there were 802 enforcement cases involving fraud, and the majority of these fraud cases involved unregistered individuals selling unregistered securities. Specifically, 583 actions involved unregistered securities, and 667 actions involved unregistered firms or individuals. Most troubling, these fraudulent offerings are increasingly being marketed on the Internet.
In order to protect against unregistered firms and securities, investors should always verify that they are dealing with registered entities. Brokers and financial advisers are required to register with local and federal regulators. In addition, most investment products must also be registered with the federal or state regulators where they are offered or sold. You can use FINRA’s BrokerCheck to ensure that the professional you are dealing with is federally registered, or SEC’s EDGAR to check that a security is registered. In addition, you can contact your state regulator to verify that a professional or security is state registered.