September 11, 2012
NASAA 95th Annual Conference
Thank you Jack, for your kind introduction.
Good afternoon. My name is Heath Abshure and I am extremely happy to be here addressing you as the incoming NASAA President.
To all of my fellow regulators from the United States, Canada and Mexico, and our other distinguished guests, thank you for being here and sharing this event with me. It is an honor to be at this podium.
As I learned early in my professional career, you need to listen to the advice of those with experience. So, I consulted past NASAA presidents in writing this address. One wise past president told me “Heath, we will be in San Diego. It will be nicer outside than it will be inside listening to you.” I also considered the advice of Coach Bear Bryant who once said “Don’t talk too much or too soon.” Considering this is day one of my presidency, I will attempt to heed Coach Bryant’s advice.
I’d like to begin with a few words of thanks.
To Irv Faught, the conference chair, and the NASAA staff, thank you very much for your hard work in making this conference such a success.
To all of my fellow regulators. Thank you for your hard work and support as we fought against the changes to Rule 506, crowdfunding and other preemptive provisions of the JOBS Act. We also fought Round One of the battle against imposition of a self-regulatory organization on state-registered investment advisers. Thank you for your help during the past year, and for your ongoing efforts as we continue to oppose state and federal legislation that may corrupt the delicate balance between investor protection and capital formation.
To the Staff of the Arkansas Securities Department. Your dedication and professionalism have allowed me to be here today, and I thank you for your continued effort during the upcoming year.
To my beautiful wife Ronna, who unfortunately couldn’t be here today. Next week is our 10th anniversary. It has been ten years since Ronna and I stood before a skinny Elvis in a fat Vegas Elvis costume at the Viva Las Vegas Wedding Chapel. Our vows were legally binding, I hope. It is still the easiest and best decision I have ever made, and her only questionable one. She has stayed with me notwithstanding any questions regarding the validity of our Elvis union. To Ronna, I would say “Thank you, Thank you very much.”
And to Jack Herstein, much thanks for your excellent leadership of NASAA. Your performance as President was exemplary, and I have learned greatly from watching you during this past year. I am very lucky to have the benefit of your advice and experience during the upcoming year. Please join me in a round of applause for Jack.
I would also like to make a few introductions.
I am very pleased to introduce the new NASAA Board of Directors:
- President-elect Steve Irwin of Pennsylvania,
- Past President Jack Herstein of Nebraska,
- Treasurer Fred Joseph of Colorado,
- Secretary Chris Naylor of Indiana,
- Patricia Struck of Wisconsin,
- Melanie Lubin of Maryland,
- Douglas Brown of Manitoba, and
- Matt Kitzi of Missouri
I am very pleased and excited to be working with such a fantastic board. Please join me in a round of applause for the NASAA Board.
I am also very pleased to announce the Section Chairs and other appointees for the upcoming year, subject to Board approval tomorrow.
- Bill Beatty of Washington will chair the Corporation Finance Section Committee.
- Linda Cena of Michigan will chair the Investment Adviser Section Committee.
- John Cronin of Vermont will chair the Broker-Dealer Section Committee.
- Daphne Smith of Tennessee will chair the Investor Education Section Committee, and
- Judy Shaw of Maine will chair the Enforcement Section Committee.
I also have reappointed Ron Thomas of Virginia to serve as New Member Advocate and Matt Neubert of Arizona as Ombudsman.
Please join me in a round of applause for the Section Committee Chairs, the New Member Advocate, and the Ombudsman.
I take great comfort in the individuals comprising the Board, the Section Committee chairs, and all of the other Project Group and committee members in NASAA. I am surrounded by some of the smartest and most capable people with whom I have ever worked. Thank you all for the value of your experience, insight, and wisdom.
I would like to spend the rest of my time here discussing briefly one of my goals as NASAA president: to fight against preemption or marginalization of state securities regulation by advancing our status as the most effective and balanced securities regulator in North America.
My emphasis this year will be our response to the rapidly changing regulatory environment. I want to focus on what we can do, and if we harmonize our efforts, what we can become. If we harness our potential and speak as one, we will be the most reasonable, trusted, and influential securities regulator in North America.
State securities regulators in the United States are basically preempted from essential broker dealer and corporation finance regulation. We still have regulatory authority over state registered investment advisers, but we just witnessed the first step toward preemption in that area—the push for a self-regulatory organization. While the first round of that battle may be over, I have no doubt that Round Two will start soon.
We have long maintained a defensive position, using our admirable enforcement record to defend against further attacks on our jurisdiction. But, reliance on our enforcement efforts has done little to stem the tide of preemptive legislation coming out of Washington.
Don’t get me wrong, enforcement remains one of our most fundamental tasks, if for no other reason, because no other regulator is going to act to protect hometown investors. However, I am concerned that this reliance, coupled with the inefficiencies resulting from divergent regulatory frameworks and requirements, will continue the trend toward preemption. I worry that we may become nothing more than enforcement offices, all preempted from the ability to determine reasonable front-end regulatory measures to promote economic growth and prevent fraud.
The securities markets are too large and too diverse for one government regulator to oversee. It is woefully shortsighted to assume that one government regulator can be the most useful resource for all broker-dealers, all investment advisers, all issuers, and all investors of any size, from the ExxonMobils to the sole proprietorships, from the Calpers to the widowed retiree on Social Security.
Given the size and complexity of the market, we are presented with a unique opportunity. We should conduct a critical self-examination, consider the changes to securities regulation brought about by globalization and rapidly changing technologies, and stake our claim to those areas where we are the most efficient, effective, and appropriate regulator—the regulator most likely to serve as a valuable resource to issuers, investors, and the industry.
The markets are larger and more complicated than ever before. But, we have robust tools that enable us to act as one and speak with one voice. Rather than acting and regulating as separate entities, we have the ability to consider important issues collectively and issue uniform guidance in a timely manner.
Consider our ability to strike the reasonable balance between investor protection and capital formation along with our ability to speak reasonably and collectively with one voice. Now add the benefits of our physical presence in each state, territory, and province. It is clear to me, and I to hope most people in this room, that we should have an active voice that is not only heard by lawmakers, but heeded. However, history has proved that not to be the case. This is what we must change.
How do we change this? We get aggressive. We add offense to our defense. We focus not only on protecting our existing jurisdiction, but utilizing our capabilities and expertise to expand our jurisdiction and influence.
However, we must be mindful of the advice of Coach Darrell Royal. “You can’t be aggressive and confused at the same time.” Working together, we must develop and implement a strategy that not only wards off continued pushes for preemption, but also proves to lawmakers and industry that we are the most able, competent and appropriate regulators to be the lead, if not the sole, regulator in a number of areas.
We must show that our role strikes the most reasonable balance between investor protection and capital formation. If the JOBS Act is any indication, lawmakers appear willing to sacrifice reasonable regulation for perceived economic growth. However, reasonable regulation is essential to facilitate the investor trust necessary for economic growth. But all too often, lawmakers believe that unregulated markets promote growth. We must persuade lawmakers that this belief is misguided and prove that we are the best option to promote capital formation while at the same time maximizing safe and secure investing for consumers.
For this, we need every state administrator to establish a relationship with their legislators at home and their Congressional delegation. They need to know us if we want them to listen to us.
We have to exhibit our ability to craft and implement regulations that are reasonable, efficient, and effective. The new Regulation A+ presents us with an opportunity to show Washington and the industry what we can accomplish. I have asked Bill Beatty and the Corporation Finance Section to make this a priority in the upcoming year. The investment adviser switch presented the same sort of opportunity. The Investment Adviser section and our membership excelled during the switch process, serving as invaluable resources to all those involved. Now it is up to us to prove that through reasonable, effective and efficient regulation of state-registered investment advisers, a self-regulatory organization is an unnecessary burden.
However, Regulation A+ and state-regulated investment advisers are not enough. We should strive to be leaders in the timely development of uniform laws and regulations to address the rapidly changing issues in the markets. This includes responses to developments in all areas of regulation, including broker-dealers and enforcement. If we can speak timely with one voice on these issues, it will facilitate the continued development of a more efficient and effective system of state and provincial securities regulation across the board.
As I said before, we need to develop an offense. The Federal Legislation Committee, working with the Board and the membership, should consider and propose a realistic legislative agenda that we want to promote; bills we want to draft. It is not enough to wait and respond to the next preemptive or equally harebrained bill. To be honest, I am tired of our members traveling to Washington to respond to someone else’s bill. I look forward to our members traveling to Washington to promote our bills.
We must continue to educate and serve as an advocate for investors. This includes continuing the strong work of the investor education section. Further, we should act to identify and seek to remedy unfairness in laws, regulations or administrative procedures that threaten to harm investors, such as mandatory arbitration. When appropriate, we must speak on behalf of small investors whose voices cannot be heard over the din of the lobbyists and industry.
In all of this, we have to speak with the one voice of reason; the one unbiased voice that strikes the most appropriate balance between industry and investor.
As we have seen over the past years and we have discussed at this conference, the securities markets and regulation of the industry continue to go through rapid changes. These changes present an opportunity that we must grab to enhance our position as the most appropriately aggressive, yet reasonable and unbiased, securities regulator.
Considering our illustrious history, our excellent track record, our universal reputation for fighting the good fight, and our physical presence throughout all of North America, we stand poised to be the most thoughtful, appropriate, and influential voice whenever changes to the system of securities regulation are being considered.
As a nod to my friends from the North, I would like quote Wayne Gretzky. He said “You miss 100% of the shots you don’t take.” It is time for us to take some shots on goal. No one is going to grant freely deference and authority to us, no matter how reasonable and appropriate it may be. We must fight to earn it, and we must take the fight to them.