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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<img style="max-width: 100%;height: auto" width="400" height="267" src="https://www.thregupdate.com/wp-content/uploads/sites/1016/2025/01/GettyImages-1409732559.jpg" class="attachment-lxb_af_3_of_4-wide size-lxb_af_3_of_4-wide wp-post-image" alt="" />
			As federal regulators scale back enforcement and staffing, state securities regulators are positioned to fill the gap. In a recent <a href="https://urldefense.com/v3/__https:/drive.google.com/file/d/1yO4ljSVI7nJXGNaYS43pMt6xY8m3afD8/view?usp=sharing__;!!OdqygGz-7UHvSw!q55zbKz7b5h1cIGkxsEgw4nQt6lK4c0pRd1y9q5JuP2mH5vnPHO8TyJ1SGQf6vHgLtlPu-igYFRbeiEXGtyZFhno38I%24">CRC Oyster Consulting webinar</a>, titled &ldquo;Navigating the Evolution of States Securities Regulations,&rdquo; Bill Riley, Director at CRC Oyster and former bureau chief at the Florida Division of Securities spoke with <a href="https://www.thompsonhine.com/professionals/marc-b-minor/">Marc Minor</a>, 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.&nbsp; Here are the main takeaways from that discussion.
The Landscape Is Shifting from Federal to State
<ul class="wp-block-list">
<li>Firms must stay current on &nbsp;&nbsp;every U.S. state and territory where they operate.</li>
<li>Much of state regulation works through adoption by reference of SEC, FINRA, and NASAA &ldquo;model rules.&rdquo;</li>
<li>Historically, when federal regulatory policy pulls back, states often step in to fill the gaps.</li>
<li>2025 reports show that FINRA&rsquo;s disciplinary cases dropped 14&ndash;15% last year, but fines and penalties rose.</li>
</ul>
Use the Quiet Period to &ldquo;Patch the Boat&rdquo;
<ul class="wp-block-list">
<li>Revisit your last examination for unresolved comments or deficiencies.</li>
<li>Engage a compliance consultant who tracks rule changes and provide industry best practices across many clients.</li>
<li>Run mock exams&mdash;targeted or comprehensive&mdash;to find the holes before a regulator does.</li>
<li>Consult counsel or a consultant early for regulatory inquiry. Even at the discussion stage, experienced advisers can narrow a review&rsquo;s scope and reduce disruption.</li>
</ul>
Understand Your State Regulator
<ul class="wp-block-list">
<li>Registration and enforcement approaches vary significantly by state; knowing a regulator&rsquo;s history and personnel shapes strategy.</li>
<li>Build a directory of state agency contacts as a go-to resource.</li>
<li>Decades in sales experience does not equal compliance expertise&mdash; they are two different disciplines. Varying CCO risks are sharpest for smaller, state-regulated advisors (AUM under $100 million) .</li>
</ul>
Where Enforcement Is Focusing Now
The <a href="https://www.nasaa.org/wp-content/uploads/2025/10/2025-NASAA-Enforcement-Report_FINAL.pdf">2025 North American Securities Administrators Association (NASAA) Enforcement Report</a> (covering 2024 activity) ranked top state categories as:
<ul class="wp-block-list">
<li>Securities fraud (number one)</li>
<li>Unregistered sale of securities</li>
<li>Unregistered activity</li>
</ul>
Newer threats&mdash;social media schemes and digital assets&mdash;are underrepresented in 2024 data and expected to grow fast. The <a href="https://www.nasaa.org/wp-content/uploads/2025/09/2025_IA_Coordinated_Examinations.pdf">Coordinated Investment Adviser Exam Report</a> (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
<ul class="wp-block-list">
<li>Scammers can now reach millions with one keystroke. AI deepfakes can fabricate amazingly convincing deceptions from just 15&ndash;20 seconds of audio or video.</li>
<li>AI compliance tools are emerging, but human oversight remains essential while AI still &ldquo;hallucinates.&rdquo;</li>
<li>Marketing rule enforcement is maturing- practices like cherry-picking performance results are increasingly likely to draw attention.</li>
</ul>
Digital Assets and Investor Protection
<ul class="wp-block-list">
<li>Crypto is now a dedicated section in many state exams; a federal safe harbor for crypto custody has fallen away, prompting new exam rubrics.</li>
<li>NASAA issued an open letter to Congress on the proposed CLARITY Act.</li>
<li><a href="https://www.nasaa.org/3752/top-investor-threats/">NASAA&rsquo;s Top 12 Investor Threats</a> (December 2025) highlighted deepfakes, website/app spoofing, &ldquo;pig butchering&rdquo; and romance scams, and risks targeting aging Americans.</li>
</ul>
What This Means for You
<ul class="wp-block-list">
<li>Treat this lower-enforcement window as preparation time&mdash;run mock exams, review past deficiencies, and select a consultant now.</li>
<li>Read the NASAA Enforcement Report and the Coordinated Investment Adviser Exam Report&mdash;they signal where to focus compliance spend.</li>
<li>Don&rsquo;t assume sales experience equals compliance competence, especially at smaller advisory firms.</li>
<li>Build your network&mdash;knowing who to call at a state agency can matter as much as knowing the rules.</li>
<li>Prioritize AI and cybersecurity to protect client PII and technology that help recognize scams.</li>
<li>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.</li>
</ul>
State regulators are stepping up just as federal oversight eases. Firms that use this window to strengthen compliance programs&mdash;rather than coast&mdash;will be far better positioned for what comes next. Contact your Thompson Hine counsel today to stay prepared.

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