WASHINGTON, D.C. December 11, 2008 — A delegation of state securities regulators today offered the incoming Obama Administration and the 111th Congress a series of principles and recommendations to ensure that efforts to reform the financial services regulatory structure provide Main Street investors with a system that is strong, comprehensive, collaborative and efficient.
The members of the North American Securities Administrators Association (NASAA), the oldest international organization devoted to investor protection, outlined a series of steps to help guide the policy debate over the next generation of financial services regulation.
“I believe our principles and recommendations provide an appropriate level of investor protection through a new financial services regulatory structure that promotes responsibility, accountability and transparency,” said NASAA President and Colorado Securities Commissioner Fred Joseph. “As policymakers map out this new regulatory structure, we urge them to fully recognize the extent of the contributions of state securities regulators to consumer protection in financial services.”
During a roundtable discussion, Texas Securities Commissioner Denise Voigt Crawford discussed the importance of preserving the longstanding system of state/federal regulatory cooperation. “Financial markets today are more complicated than ever. In this environment, it makes no sense to lessen the influence of regulators,” Crawford said. “When it comes to securities regulation, one size does not fit all. It is dangerous to rely on one regulatory model during a time when regulation has not kept pace with innovation in financial services and markets – innovation that has had both positive and calamitously bad effects on investors.”
Outlining the need to strengthen the standards of conduct that apply in all financial sectors, Maryland Securities Commissioner Melanie Senter Lubin called for the imposition of a fiduciary duty—in addition to existing standards—on all securities professionals who dispense investment advice, including broker-dealers. “This will enhance investor protection, eliminate confusion and even promote regulatory fairness by establishing conduct standards according to the nature of the services provided, not the licensing status of the provider,” she said.
Illinois Securities Director Tanya Solov discussed the inherent risks investors face as enormous amounts of capital are traded through esoteric investment instruments on opaque financial markets that are essentially unregulated. “Our system must be more comprehensive and transparent, so that all financial markets, instruments, and participants are subject to effective regulation through licensing, oversight and enforcement,” she said.
Alabama Securities Commission Director Joe Borg said one critical aspect of managing risk is better interagency communication. “If the goal of Congress, the incoming Administration, federal and state regulators, and industry participants is to create an effective and efficient financial services regulatory system, then we must improve our existing tools and take steps to design and create new techniques and systems to detect and monitor risk in the financial markets,” he said. Borg also recommended the expansion of the President’s Working Group on Financial Markets to include representatives from the state agencies that regulate banking, insurance and securities.
Delaware Securities Commissioner James Ropp called for tougher punishments and greater support for private remedies for harmed investors. “We should toughen punishments for those who violate the law and increase enforcement budgets for state securities regulators,” Ropp said. “In addition, we must remember that the private rights and remedies of injured consumers are an essential complement to government enforcement efforts aimed at deterring fraud. The pendulum has swung too far in the direction of limiting private rights of action.”
NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.
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Bob Webster, Director of Communications