Brokers charged by state securities officials see prison time rise

Prison sentences for brokers charged with investment fraud by state securities regulators increased 33% in 2013, compared with the previous year, according to the North American Securities Administrators Association. The extended jail time “reflects the heinousness of the crimes” that state securities cops have had to investigate when bringing criminals to justice, said William Beatty, NASAA president and director of the Washington Securities Division. Last year, state regulators conducted 4,882 investigations, which led to 2,184 enforcement actions. These enforcement actions resulted in 1,816 years of jail time for criminal defendants. The average sentence for criminal defendants in cases stemming from investment fraud was 5.5 years in 2013, compared with 3.6 years in 2012. Criminal defendants were ordered to serve 679 years of probation last year, up 96% from 2012. State enforcement actions also resulted in $616 million returned to investors and $72 million in fines or penalties, NASAA's statistics show. “State securities regulators continue to serve as a strong line of defense to protect the public against investor fraud,” Mr. Beatty said. He noted that one of the key investor protection roles served by state securities regulators is to weed out bad actors before they have a chance to conduct business with unsuspecting investors. In 2013, the licenses of 3,438 broker-dealers, investment advisers and their representatives were either withdrawn, denied, revoked, suspended or controlled by state securities regulators. “Screening bad actors on the front end as a preventative measure is an often overlooked but vitally important way state securities regulators protect investors before their money can be lost,” Mr. Beatty said. The majority of investor fraud cases involve unregistered individuals or firms.