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The Division has been allocated 27 full-time employees by the Colorado General Assembly. In the enforcement section, this includes nine investigators and two auditors. The investigators review various matters that may involve securities or other investment fraud, compile evidence, and prepare enforcement cases for litigation. The auditors assist during investigations through forensic accounting procedures. Some of these investigative matters may result in the commencement of administrative, civil, and/or criminal legal actions. In general, enforcement actions taken by state securities regulators have become a necessary tool for investor protection. This is, in part, in response to changes in the federal laws that have limited the state's regulatory power and private investor's civil remedies.
In the examination section, there are ten examiners who perform a variety of functions. These include the examination/inspection of broker-dealers and investment advisers and their employees, licensing of sales representatives (i.e., stockbrokers), and broker-dealers, investment adviser representatives, investment adviser firms, review of securities registration or exemption filings, and responding to inquiries from the general public. Colorado licenses approximately 2,200 broker-dealers and 170,000 sales representatives. The examiners perform approximately 175 field examinations during each fiscal year. The remainder of the staff perform administrative and operational functions for the Division.
Of most import to the securities and investment markets is the on-going restructuring of regulatory oversight of these markets in response to the recent financial crisis. The Division, as a state regulator, is seen as the first line of defense for Main Street investors. The Division responds to investors who typically call them first with complaints or requests for information about securities firms or individuals. The Division works on the front lines, investigating potentially fraudulent activity and alerting the public to problems. Because of this role, the Division is often first to identify new investment scams and to bring enforcement actions to halt and remedy a wide variety of investment-related violations. For example, the Division continues to lead the effort to ensure that Colorado investors receive redemptions for their frozen auction rate securities that were marketed as safe and liquid investments, an effort that already has resulted in the largest return of funds to Colorado investors in history. As the regulator closest to investors, the Division provides an indispensable layer of protection for Main Street Colorado investors.
Over the next 20 years, some 75 million Americans will turn 60. That is about 10,000 people turning 60 every day. According to the Securities Industry and Financial Markets Association, future seniors fall into three groups. The first group, the top fifth in terms of wealth, have accumulated all the funds they need to retire, and more. They can, and probably will, safely switch their assets to investments that bear little or no risk. The second group, the bottom fifth in terms of wealth, have saved next to nothing and will rely on government income supports. The third group, 60% of future seniors, have some savings, but not enough to last them through their extended life expectancy. They will have a higher tolerance for investment risk because growing their nest egg is their top priority. The third group’s higher tolerance for investment risk will put millions of seniors at risk of falling victim to scam artists, at the very time of their lives when they can least afford it. A recent survey of state securities regulators shows that an estimated 44% of all investor complaints received by state regulators are made by seniors. In addition, the survey found 31% of all enforcement actions taken by state securities regulators involve senior investment fraud. Senior investment fraud is a serious ongoing problem that only will grow without targeted enforcement and enhanced investor education.
Identity theft is the fastest growing crime in America. Technological advances and the proliferation of the internet have enhanced investors’ exposure to those seeking to steal their identities. Soon, all securities transactions will be handled electronically. Investors and participants in the securities markets will be exposed to a greater extent to identity theft than before. This trend requires both enforcement and examination sections to expand their review of internet activities and controls.