State Securities Enforcement

Each year, state securities regulators bring over twice the enforcement actions brought by the Securities and Exchange Commission, yet their work is largely missing from the literature. This Article provides an institutional account of state securities enforcement and identifies two key advantages—detection granularity and institutional decentralization—that states enjoy over their federal counterparts in policing localized frauds involving individual, often small-dollar, victims. Although states share enforcement jurisdiction with the SEC and DOJ, their enforcement activity reflects their institutional advantages and constraints and thus largely does not overlap with that of federal authorities. Instead, states serve as the nation’s residual securities enforcers, policing local misconduct that federal authorities or private plaintiffs largely do not. The states’ work as residual securities enforcers should thus guide state and federal authorities as they cooperate and complement each other’s enforcement missions. And given the need for local investor protection, proposals around national securities policy should bolster that work or, at the least, mitigate negative impacts on it.