The Federal Government's Role in Empowering Americans to Make Informed Financial Decisions

Written Statement of the
North American Securities Administrators Association
U.S. Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on
Oversight of Government Management, the Federal Workforce,
and the District of Columbia

April 30, 2007

Introduction to NASAA:
The North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection.  It was organized in 1919 and is a voluntary association with a membership consisting of 67 state, provincial and territorial securities regulators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico.

These state administrators are responsible for the licensing of firms and investment professionals, registration of certain securities offerings, examination of broker-dealers and investment advisers, enforcement of state securities laws, and investor education.

Financial Education Role of State Securities Regulators:
The securities regulators that form the NASAA membership are firmly committed to promoting and supporting financial literacy, and are dedicated to delivering financial education.  We believe we have an ongoing obligation to help our constituents develop the knowledge they need to make sound personal financial decisions.  We believe that reaching our young citizens with financial education at a very early age can help them build a lifetime of good money management habits.  And we believe that financial education is the first and best defense against financial fraud, abuse, and exploitation.

We recognize that the ability to make good financial decisions can make the difference in assuring that our citizens become and remain productive economic contributors.  We also realize that the ability to make good financial decisions ultimately impacts the economic health of our families, our communities, our states, and this nation overall.

NASAA members have long served as advisers on education issues and are currently liaisons to the Securities Industry/Regulatory Council on Continuing Education.

NASAA Investor Education Section:
The NASAA Investor Education Section was created in 1997 by the NASAA Board of Directors to help support the financial education efforts of our members.  The Investor Education Section, along with a network of professionals from across the NASAA membership, is responsible for developing, coordinating, delivering, and supporting financial education initiatives that can be utilized by state securities regulators in their ongoing endeavor to improve the level of financial literacy in their jurisdictions.  Currently, the Section has five focus areas:  Youth Outreach, Senior Outreach, Affinity and Ethnic Based Outreach, Coordination and Online Resources Awareness.

At the Grassroots Level:
Nearly all state and provincial securities regulators have established investor education departments or divisions within their agencies.  The result is a unique network of dedicated professionals delivering financial education at the grassroots level throughout North America.  Our financial education professionals can be found at work in such venues as the classroom, the workplace, senior centers, and at trade and professional organization events.  They partner with teachers, employers, and peer-based volunteer groups to deliver financial education to our constituents of all ages.

Financial Literacy Education Commission:

Assessment
NASAA supported the creation of the Financial Literacy and Education Commission, and we were grateful to have the opportunity to make a presentation to the FLEC on May 20, 2004, and to participate in one of the FLEC’s national strategy meetings on March 4, 2005.   In addition, in our ongoing effort to remain engaged in FLEC policy making, NASAA sent a comment letter concerning the formulation of its national strategy.

NASAA applauds the efforts of the Financial Literacy Education Commission and agrees with the GAO’s report (Financial Literacy and Education Commission: Further Progress Needed to Ensure an Effective National Strategy, December 2006) that the “inherent difficulty of coordinating the efforts of 20 federal agencies, small number of staff devoted to operating the Commission and the limited funding” do provide constraints to their effectiveness.

While the Commission, in the GAO’s words, has taken “some positive first steps,” there has been slow but deliberate progress in integrating the commission’s national strategy for financial literacy. One challenge to be addressed is how to organize the existing financial literacy programs of the Commission’s members and how best to reach a consensus on a harmonized message.  Another challenge the commission faces is disseminating the programs/information to the public from a centralized location in Washington, DC.  In this regard NASAA members stand ready to partner with the Commission to mobilize their respective grassroots networks to reach more people in need of financial education.

Coordination of Efforts and Partnerships
NASAA was honored to be invited as a panelist in the April 17, 2007 inaugural meeting of the National Financial Education Network.  The Commission stated this new network is intended to create an open dialogue and advance financial education at the state and local level.  NASAA encourages the Commission to move forward in establishing effective ways of connecting all parties both electronically and through face to face meetings throughout the year. This dialogue and communication could be facilitated electronically through a list serve and web site and quarterly conference calls.

It is essential that this National Financial Education Network be fully integrated into the framework of how the Commission operates thus utilizing and mobilizing the vast resources of both state and private and nonprofit organizations and their extensive networks.  Full integration of the National Financial Education Network would ensure that events held across the nation include all members of the financial literacy community that wish to participate.
One example of how this could work effectively is to coordinate joint events with both Treasury and state officials as participants. That way, we could leverage resources, and members of the audience have a local point of contact for future questions and requests for information.

NASAA agrees with the GAO’s assessment that “greater collaboration by the Commission with state and local governments may be particularly important given the critical role that school districts can play in improving financial literacy.”  Further consideration should also be given to the GAO’s recommendation that “the Commission consider how the federal government can influence or incentivize states or school districts to include financial education in school curriculum.”

Complete coordination with federal, state and local government and private organizations should not be considered just a step in the national strategy, but viewed as a crucial and integral part of the Commission’s mandate.  The existing grassroots network available to the commission provides the entire picture of financial literacy efforts that we believe Congress intended when creating the Financial Literacy Education Commission.  The many participants in the financial education community and the considerable amount of resources that they provide are remarkable. The Commission has a unique opportunity to unite these groups, foster dialog, and promote cooperation. Nothing short of complete cooperation with these groups will fully constitute a fully integrated National Financial Literacy Strategy.

Specific Examples of Successful State and Provincial Programs:
To better frame the nature of our work in the area of financial education and why partnership in the newly created National Financial Education Network would prove mutually beneficial to the Financial Literacy Education Commission members, we share a few highlights of several of our member’s financial education initiatives focusing on youth, senior and affinity and ethnic-based outreach.

Youth Outreach
Teaching youth the value of sound investing principles is the thrust of Oklahoma’s InvestEd™ STARS program.  STARS stands for Students Tracking and Researching the Stock Market.  This is an online investment education program produced by the Oklahoma Securities Commission and the University of Oklahoma. High school teachers take a week long training by an InvestEd™ STARS specialist who equips them with the knowledge they need to incorporate the program in their school. These teachers then take this interactive STARS curriculum to the classroom where they teach students how to research stocks, study market behavior, track long-term portfolio performance and as a capstone each student ends the course with written report on what they’ve discovered about the Stock Market.

Senior Outreach
In the area of Senior Outreach, our California member has developed a highly successful anti-fraud education program that utilizes peer-based volunteerism. The Seniors Against Investment Fraud program (SAIF) – provides seniors with a toll free call center to utilize before purchasing or investing in any type of “financial” product. The SAIF program takes a leadership role in alerting and educating Californians over the age of 50 about investment and telemarketing fraud and how to avoid being victimized.  The state of Florida developed a similar grass roots program which uses a “train the trainer approach” and utilizes regional directors and trained Senior Sleuths to spot crime in their own communities and present fraud prevention seminars.

Affinity & Ethnic-Based Outreach
In times of heightened deployment, United States service members have become targets of financial scams. These scams can directly affect unit morale and readiness as well as military service members’ credit history and military career.  To combat this fraud head on, our Pennsylvania member developed Operation ASAP which stands for Armed Services Assets Protection Program. The program run by the Pennsylvania Securities Commission is an online resource to give military personnel and their family members the tools they need to invest wisely and avoid scams.  Other NASAA members have created similar programs such as California’s “Troops Against Predatory Scams,” or TAPS.

One of our Canadian members in British Columbia decided to confront religious affinity fraud by creating their own God’s Fraud Squad.  The program developed by the British Columbia Securities Commission and supported through the BCSC Education Fund, raises awareness and protects religious congregations from affinity fraud. Two ordained chaplains, trained by the BCSC provide investor education to congregations of all denominations and caution them to guard against those looking to “fleece the flock.”  Our New Mexico member has a similar initiative called “Preying on those who Pray.”

Partnering Relationships/Collaborations: 
NASAA looks for opportunities to join forces with other members of the financial education community.  NASAA believes it is essential to pool our resources and share our expertise on these joint ventures. Most recently NASAA partnered with the securities industry, in offering the “Understanding Your Brokerage Account Statement” brochure.  This was significant because the brochure is also offered in Spanish which links investment education to the fast-growing, yet, underserved Spanish-speaking population in the United States.

NASAA members seek other avenues of educational outreach to specific groups like senior investors through events such as the Senior Olympics and the National Council on Aging Conference. On a regular basis, our members work with the American Savings Education Council, the Councils for Economic Education, and are involved in state level Jump$tart coalitions.

State securities regulators meet annually with the financial education professionals from the Securities and Exchange Commission to engage in a dialogue about our respective programs and progress in the ongoing quest to improve financial literacy.  This meeting gives us an opportunity to learn what’s new or under development, helps us identify gaps in financial education, leverage resources of our financial education colleagues, and further hone best practices.  NASAA and the SEC continue to build on joint partnership to protect senior investors.  Last year NASAA and the SEC held the first ever Seniors Summit in July 2006.

Plans are underway for a second Seniors Summit this fall where the results of “free lunch” examinations in which NASAA administrators and SEC enforcement have partnered will be released.  The 2007 Seniors Summit will also provide the solutions and tools seniors need to combat fraud.

Resources:
The NASAA network of financial education professionals can be an excellent delivery vehicle for state/federal collaborative education programs.

NASAA offers a wide range of investor education resources on its website.  Visitors to the site will find a wealth of information to help them build both financial knowledge and financial security.  Among other educational experiences on the NASAA Web site, visitors can utilize the Senior Investor Resource Center and the NASAA Fraud Center, and locate state specific resources available through individual NASAA members.

These resources, along with brochures, investor alerts and other financial education materials are available in the Investor Education Sectionof the NASAA website. In addition, NASAA developed and funds the Investing Online Resource Center.

Conclusion:
State securities regulators have traditionally been a highly effective resource in the pursuit of greater financial literacy.  They represent a nationwide network of highly trained, unbiased, non-commercial experts in financial services, products and fraud avoidance.  They are on the front lines of financial education initiatives in every state, translating Wall Street to Main Street for small investors throughout the country.  NASAA and its members welcome the opportunity to work more closely with both the Financial Literacy Education Commission and Subcommittee members in their ongoing efforts to improve the level of financial literacy throughout the country.

April 30, 2007

Issues & Advocacy, Legislative Activity, Testimony