What problems? Violations in NASAA sweep exams fall dramatically
A roundup Monday of coordinated state investment advisor examinations so far in 2023 found that surprisingly, violations have plummeted over two years.
Compared with exams in mid-2021, the North American Securities Administrators Association found that across categories such as registration, books and records, and supervision and compliance, the incidences of violations were down by half or more.
An announcement published alongside the report didn’t offer an explanation for the sharp decline in investment advisor violations, but some of the improvement could stem from advisors having addressed issues from prior routine exams, said Alisa Goldberg, chair of the investment advisor operations project group at NASAA and director of the Florida Division of Securities.
“We cannot know for sure — however, NASAA and the state regulators have been working very hard with the state-registered investment advisors to take them into compliance. A number of these exams were second-time exams,” Goldberg said. “We would hope that they would be more compliant, based on previous interactions with them.”
For the 2021 report, 24% of the investment advisors were examined by their states for the first time. That figure increased this year to 34%, with 232 of the 683 routine exams in the report being the first that firms had faced.
This year, for example, nearly 23% of firms had exams that turned up violations related to registration, down from just over 44% in 2021. The second most common violation area — books and records, largely related to client suitability — saw the incidence drop from 42% to 17%. And in supervision and compliance, the rate fell from 29.5% to over 16%.
The decline was even more dramatic regarding contract violations, which
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