These Are the Biggest Causes of State Enforcement Actions, Securities Regulators Say

Breach of fiduciary duty and failure to register were among the most common types of misconduct leading to enforcement actions by state securities regulators in 2023, according to just-released data from the North American Securities Administrators Association.

The number of state-registered investment advisors stands at 16,897 in 2023, a decrease of 166 firms from the previous year, NASAA’s annual report states.

The top causes of enforcement actions (both litigated and settled short of a hearing), as outlined in the report, are:

Failure to register as an investment adviser
Failure to register as an investment adviser representative
Fraud
Failure to maintain adequate compliance policies and procedures
Breach of fiduciary duty, failure to disclose conflicts of interest (tie)
Fees
Violating adviser’s existing policies and procedures
Suitability violations
Equities, ETFs, private placements, failure to disclose a disciplinary action (four-way tie)

Clients Served, Compensation

NASAA’s annual survey also reveals that state-registered firms primarily serve retail investors (74%) followed by high-net-worth clients (18.9%). The majority of firms, 94.7%, are registered as investment advisor representatives, and most firms, 84.3%, charge a percentage of assets under management.