This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

The Number of Crooked Financial Advisors Surges

By Hal M. Bundrick for MainStreet

NEW YORK (MainStreet) The number of crooked financial advisors is on the rise, and seniors should be particularly wary, according to the North American Securities Administrators Association (NASAA). As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, more than 2,000 investment advisors moved from federal to state regulation, and with that transition came more rigorous oversight of stockbrokers and investment advisers.

According to the NASAA's annual enforcement survey, the number of securities licenses forfeited due to state enforcement actions increased by 27%, from 2,796 to 3,564. In addition, 736 licenses were denied, revoked, suspended or issued with conditions.

"Closer scrutiny of licensing applications has resulted in a noticeable increase in the number of licensing withdrawals in the past year," says Andrea Seidt, NASAA President and Ohio Securities Commissioner. "Our survey shows several important trends in investor protection and securities regulation, including continued investor reliance on state regulators to address both traditional areas of securities fraud and emerging issues."

But enforcement of investment fraud extends beyond licensed advisors and includes unlicensed, rogue brokers selling unregistered securities. States reported 580 actions involving unregistered securities and 576 actions involving unregistered firms or individuals. Private offerings were at the top of the list for enforcement actions, for the third straight year. An increasing number of these investment scams are posted on the Internet. Oil and gas schemes were the second most reported scam.

The NASAA also notes a rising number of "affinity" frauds, where investors are targeted by scammers claiming to represent a social, religious or charitable organization. Investment frauds frequently feature "to good to be true" offerings of real estate, gold and precious metals, annuities and foreign currency trading programs.

The report also notes that 15% of state enforcement actions involved financial abuse of seniors. Promissory notes, private offerings and investment contracts account for over half of the cases targeting older investors, many times resulting from a "free lunch" seminar invitation.

State securities regulators conducted 5,865 investigations in 2012, which led to 2,496 criminal, administrative and civil enforcement actions. Prison time resulting from state-initiated actions totaled 1,361 years.

Enforcement actions from state regulator investigations netted nearly $700 million in investor restitution orders in 2012, plus fines, penalties and collected costs in excess of $157 million.

--Written by Hal M. Bundrick for MainStreet

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs