As federal regulators scale back enforcement and staffing, state securities regulators are positioned to fill the gap. In a recent CRC Oyster Consulting webinar, titled “Navigating the Evolution of States Securities Regulations,” Bill Riley, Director at CRC Oyster and former bureau chief at the Florida Division of Securities spoke with Marc Minor, Senior Counsel at Thompson Hine LLP and former Securities Administrator for New York and New Jersey, about where regulators are focusing and how firms can prepare.  Here are the main takeaways from that discussion.

The Landscape Is Shifting from Federal to State

  • Firms must stay current on   every U.S. state and territory where they operate.
  • Much of state regulation works through adoption by reference of SEC, FINRA, and NASAA “model rules.”
  • Historically, when federal regulatory policy pulls back, states often step in to fill the gaps.
  • 2025 reports show that FINRA’s disciplinary cases dropped 14–15% last year, but fines and penalties rose.

Use the Quiet Period to “Patch the Boat”

  • Revisit your last examination for unresolved comments or deficiencies.
  • Engage a compliance consultant who tracks rule changes and provide industry best practices across many clients.
  • Run mock exams—targeted or comprehensive—to find the holes before a regulator does.
  • Consult counsel or a consultant early for regulatory inquiry. Even at the discussion stage, experienced advisers can narrow a review’s scope and reduce disruption.

Understand Your State Regulator

  • Registration and enforcement approaches vary significantly by state; knowing a regulator’s history and personnel shapes strategy.
  • Build a directory of state agency contacts as a go-to resource.
  • Decades in sales experience does not equal compliance expertise— they are two different disciplines. Varying CCO risks are sharpest for smaller, state-regulated advisors (AUM under $100 million) .

Where Enforcement Is Focusing Now

The 2025 North American Securities Administrators Association (NASAA) Enforcement Report (covering 2024 activity) ranked top state categories as:

  • Securities fraud (number one)
  • Unregistered sale of securities
  • Unregistered activity

Newer threats—social media schemes and digital assets—are underrepresented in 2024 data and expected to grow fast. The Coordinated Investment Adviser Exam Report (1,000+ state exams) is a useful checklist, even for federally covered advisors, flagging deficiencies in contracts, fee disclosures, books and records, and marketing.

Technology Cuts Both Ways

  • Scammers can now reach millions with one keystroke. AI deepfakes can fabricate amazingly convincing deceptions from just 15–20 seconds of audio or video.
  • AI compliance tools are emerging, but human oversight remains essential while AI still “hallucinates.”
  • Marketing rule enforcement is maturing- practices like cherry-picking performance results are increasingly likely to draw attention.

Digital Assets and Investor Protection

  • Crypto is now a dedicated section in many state exams; a federal safe harbor for crypto custody has fallen away, prompting new exam rubrics.
  • NASAA issued an open letter to Congress on the proposed CLARITY Act.
  • NASAA’s Top 12 Investor Threats (December 2025) highlighted deepfakes, website/app spoofing, “pig butchering” and romance scams, and risks targeting aging Americans.

What This Means for You

  • Treat this lower-enforcement window as preparation time—run mock exams, review past deficiencies, and select a consultant now.
  • Read the NASAA Enforcement Report and the Coordinated Investment Adviser Exam Report—they signal where to focus compliance spend.
  • Don’t assume sales experience equals compliance competence, especially at smaller advisory firms.
  • Build your network—knowing who to call at a state agency can matter as much as knowing the rules.
  • Prioritize AI and cybersecurity to protect client PII and technology that help recognize scams.
  • Remember: once money leaves an account, the odds of recovering it are slim. Sound risk policy requires protecting client assets before they go out the door.

State regulators are stepping up just as federal oversight eases. Firms that use this window to strengthen compliance programs—rather than coast—will be far better positioned for what comes next. Contact your Thompson Hine counsel today to stay prepared.