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.
