2015 Presidential Address: Maine Securities Administrator Judith Shaw

September 29, 2015
NASAA 98th Annual Conference
San Juan, Puerto Rico

Buenas tardes – Bonjour- Good afternoon. President Beatty, Board Members, Executive Director Brady, colleagues, distinguished guests, conference attendees, friends. Thank you for the opportunity to address you today.

I want to start by thanking the Commonwealth of Puerto Rico for hosting this amazing conference. And a special thanks to our conference chairs – Damaris Mendoza and Joe Borg for providing us with such a rich experience.

My NASAA journey started in late 2008 and I must take a few moments to thank those who have supported me along the way starting with the Commissioner of Maine’s Department of Professional and Financial Regulation, Anne Head, for all of her support and encouragement. I also want to thank my entire staff especially our General Counsel Karla Black, Assistant Securities Administrator Paige Turney, Examiner-in-Charge Ed Moran, and my Administrative Assistant Dona Garippa. I couldn’t be more fortunate to work with all of the talented folks in my office. They all assure our mission moves forward no matter where in the world I might be.

To all of my fellow administrators and commissioners especially Patty Struck, Andrea Seidt, Melanie Lubin, Diana Foley, and Katie Daniels – you have been my inspiration and my sounding board. To one of the former NASAA President’s from Maine – Chris Bruenn – you established an incredible office in Maine and I am honored to carry your legacy forward. To former Missouri Securities Commissioner Matt Kitzi and former Vermont Securities Director John Cronin who convinced me to pursue leadership positions within NASAA resulting in me becoming Chair of the Enforcement Section Committee – thank you for believing in me. To Joey Brady and everyone in the Corporate Office – you are the backbone and foundation of NASAA and I could not succeed without you. And to President Bill Beatty – you are one of the most intelligent, humble, kind, and thoughtful people I know. You lead with a quiet confidence that serves us well and I will be forever grateful for your guidance and friendship.

Finally, I must thank the three most important people in my life. None of them could be here today but I want to share some important lessons they have taught me. I am talking about my three children.

From my youngest son, Sam, a 22 year old college student, volunteer, and tireless advocate for disadvantaged youth, I have learned the importance of pursuing your passion and never giving up.

From my daughter, Claire, also a 22 year old college student and self-professed science nerd, I have learned the importance of being a lifelong learner and avid reader – and she has taught me the value of a well-played snarky comment.

And from my oldest son, United States Marine Corps Corporal Benjamin Chamberlain, I have learned the true meaning of service. When Ben left for Parris Island, I decided to read about what he would be experiencing at boot camp. I found that there is a question that recruits are asked sometimes several times a day – “Recruit – why did you join the Marine Corps?” That’s how they talk at Parris Island. So when I saw Ben at his graduation, I asked him why he joined the Marine Corps. He responded, “Mum, someone in our family has served in every war since the American Revolution and it’s just my turn.”

And so it is my turn to stand before you as NASAA’s 98th President. For more than 100 years state, provincial and territorial securities regulators have been committed to investor protection. Before there were federal regulators and before the advent of the self-regulatory organization, NASAA and its members were advocating for and actively protecting the interests of all investors regardless of sophistication, expertise, experience, or resources. Since its first meeting in Chicago in 1918, NASAA members have tirelessly pursued their grassroots mission of investor protection as the true cops on the beat. As NASAA’s 85th President, Chris Bruenn said in her presidential remarks in 2002, “No one can police the retail point of sale better than we can.”

I couldn’t agree with Chris more. We are the people who get the frantic calls from the retired wife begging us to come take her husband’s computer because he has day traded away their retirement funds. We are the people who identify systemic issues involving auction rate securities or conflicted analyst issues that affect our friends, family, and neighbors. We are the people who highlight emerging issues like digital currency and EB-5 visa scams before anyone else is talking about it. We are on the front line offering protection and education not to some but all of those who fall within our borders.

There are 1.33 million people in the State of Maine and every single one is my responsibility. I assure you that my colleagues feel the same way. I stand here because I am passionate and committed to that mission and, in the words of my son, it is just my turn to lead.

But I will not lead alone. I am pleased to introduced NASAA’s leadership team for the coming year. Please stand when I call your name and I would ask that everyone hold their applause until everyone is standing.

NASAA’s Board of Directors – Past-President Bill Beatty of Washington; President-elect Mike Rothman of Minnesota; Treasurer Katie Daniels of Ontario; Secretary Jerry Rome of Colorado; Director Joe Borg of Alabama; Director Diana Foley of Nevada; Director Jack Herstein of Nebraska; and Director John Morgan of Texas.

Subject to Board approval, I will be naming the following members as Section Chairs – Chair of the Broker-Dealer Section, Andrew Hartnett of Missouri; Chair of the Corporation Finance Section, Michael Pieciak of Vermont; Chair of the Enforcement Section, Laura Posner of New Jersey; Chair of the Investment Adviser Section, Patty Struck of Wisconsin; and Chair of the Investor Education Section, Lynne Egan of Montana.

And, subject to Board approval, Keith Woodwell of Utah will continue to serve as our Ombudsman.

Much like boot camp, I learned that there is one question the NASAA President-elect gets asked over and over again – what will the focus of your presidency be? I have been thinking about this for a year and here is what I came up with – there is nothing new to see here, people. For the past 98 years the message and focus has been consistent, strong and effective. As former NASAA President Ralph Lambiase said, “Market conditions may change, but our priorities must always remain the same – we are here to serve and protect investors.” And as the great Commish, Fred Joseph said in his presidential speech at my very first NASAA annual conference, “In the year ahead, I will pick up where my predecessors left off – by continuing to serve as a strong advocate for investors and for the state and provincial securities regulators who protect them.”

So, I suggest the question you all should be asking is not what is my focus, but, rather, how do I plan on accomplishing the tried-and-true mission of an organization dedicated to investor protection.

We will accomplish our mission with the same passion and commitment that we have brought since the inception of state and provincial securities regulation. In the next year, NASAA members will move forward with a renewed purpose identifying opportunities to work together and leveraging our resources in a coordinated fashion.

I have often said that NASAA’s greatest strength is its members. Quoting Thomas Paine, former NASAA President Joe Borg said, “‘Tis not in numbers but in unity that our great strength lies.” We must continue our long tradition of working together and coordinating our efforts to support one another. I will be asking all Section Chairs to look for ways in which we can strengthen existing coordinated efforts among the NASAA members and to explore new opportunities to work more closely with our federal counterparts.

In this age of technology and electronic marketing, borders are virtually nonexistent. We will find ways to leverage our available resources and support one another in the interest of investor protection. Over the next 12 months, the Broker-Dealer Section and the Enforcement Section will assist members in developing tools, resources, and the structure necessary for members to effectively coordinate examination efforts on key issues and pursue multistate enforcement action, where warranted. To be clear, NASAA can provide tools, training, and resources but coordinated efforts are initiated by and are the sole responsibility of those members participating. Such efforts increase the likelihood of meaningful relief for investors and, to the extent the industry cooperates, can be more efficient for firms.

Further, we will make sure our members and their teams have the training they need to be effective. I am recommending changes to our existing training program that are designed to strengthen the basic skills so important to new staff. For instance I am recommending that we establish a pilot project to expand NASAA’s use of distance learning to include a web-based curriculum for basic enforcement training. If the program is successful – and it will be – I will encourage NASAA to expand it in the future to include programs for the remainder of our four core subject matter trainings – broker-dealer, investment adviser, and corporate finance.

Last May NASAA held its first capital formation roundtable in Washington, DC to provide an opportunity for an open dialogue around issues important to issuers, investors, and regulators. If we are to regulate effectively, we cannot regulate in a vacuum. The roundtable provided an opportunity for us to take a critical look at our role in regulating the capital markets.

We play an important role in helping to facilitate responsible capital formation which, in turn, protects our investors on Main Street as well as our local businesses. To that end, I will be asking the Board to support a second roundtable to be held in 2016 to continue this important dialogue. Additionally, I will be supporting efforts to expand the use of the electronic filing depository carrying forward the vision of smart regulation championed by former President Andrea Seidt.

Through its Regulation A coordinated review process and full implementation of the EFD, NASAA has made great strides in the area of securities regulation. NASAA members have forged ahead in adopting crowdfunding models and we will continue our momentum in the year ahead.

In the coming year I believe that we can increase collaboration with our federal partners in both the regulatory and self-regulatory spaces. Opportunities abound. We share the same mission and should be strong partners in the fight to protect investors and generate renewed confidence in the capital markets. By way of example, I am pleased to announce that my office, in partnership with the Boston Regional Office of the Securities and Exchange Commission will be sponsoring a half day program in Portland, Maine in December specifically for SEC registered and Maine licensed investment advisers. The program will cover topics of interest to all investment advisers and will provide an opportunity for our investment advisers to see the faces behind the agencies. I will be asking the NASAA Board to include a modest amount in our budget for NASAA to participate in similar regional town hall events over the next twelve months.

We have a long history of partnering with our federal counterparts in the area of investor education and I am glad to expand that to industry outreach but outreach is not enough. We must identify the barriers to full and meaningful partnership and collaboration in enforcement, examination, and capital formation as well. I will be requesting meetings with the SEC and FINRA so together with NASAA leadership, we can identify barriers and tear them down. We are on the same team – we share common goals – together we can accomplish so much more.

In the coming year I believe that we can and must see increased cooperation from the industry we oversee. This week you have heard about successful efforts by NASAA and its members to work together and partner with the industry. The Fee Disclosure Working Group released a final report and template for use by any and all broker-dealers in order to increase transparency surrounding miscellaneous fees charged by firms. Through the leadership of Bryan Lantagne, Tanya Solov, and Carol Foehl and, thanks to the hard work of representatives from FINRA and the industry, SIFMA, FSI, LPL, Morgan Stanley, Prospera and Signator have all signed off on the report and template. I am confident that more firms will recognize the value to their clients and potential clients and will sign on in the near future.

Some of you in the industry have met me over the years and have had the opportunity to get a sense of my regulatory philosophy. And those of you who know me well know that I believe there is a clear role for enforcement, when warranted. I also believe that our examination programs can present an opportunity to be partners with industry in building and assuring a culture of compliance. By examining books and records, sales practices, supervisory procedures and the like, we may be able to detect problems early enough for firms to correct them, modify their practices, and come into and remain in compliance. Does that mean there will never be an examination that ends in enforcement? Of course not – but if we can reduce the likelihood of deficiencies haven’t we all succeeded in increasing investor protection?

Putting up roadblocks, ignoring requests for information, and looking for ways to avoid appropriate regulatory oversight does not serve anyone well – least of all investors. Cooperation and serious efforts to create a culture of compliance serve the industry well – while energy spent on trying to avoid one’s responsibility when operating in a highly regulated environment does not.

As we look forward to the next 12 months, no issue lends itself better to coordination, collaboration, and cooperation than the protection of our senior investors. Those of you who have followed my involvement with the Maine Council for Elder Abuse Prevention or read my testimony before the Senate Special Committee on Aging know that this is an issue that is very personal for me. As the Administrator of a geographically large and rural state with the oldest population in the country, I believe a community based and holistic approach to the growing problem of elder financial exploitation is critical.

One of the biggest factors contributing to the vulnerability of our older investors is social isolation. Indeed, in my hometown in northern Maine more than 25% of the residents are over 65 and live alone. All regulators, law enforcement, industry, advocates, and citizens must come together to confront this problem. You have heard this week about efforts by NASAA to work with industry, experts, federal colleagues, and advocates on our senior issues advisory council to develop best practices and trainings to help firms and their representatives identify red flags, develop or enhance internal protocols, and get information into the hands of state and federal agencies and law enforcement so we stand a greater chance of combatting elder financial exploitation. Those initiatives will continue to be developed during the coming year.

Today I am pleased to announce that NASAA is publishing for comment a proposed model act that facilitates reporting to regulators and Adult Protective Services; respects the dignity and independence of older investors by encouraging firms to develop financial advanced directives for execution by clients; permits the delay in disbursement of funds when financial exploitation is suspected; and provides immunity from administrative and civil liability for taking actions permitted under the model.

These are hard issues with competing interests to balance. But if we are serious about honoring and protecting the most vulnerable among us – we must be willing to take some risks and step outside of our comfort zones. I look forward to receiving input not only from industry but from elder advocates, investor advocates, and our federal partners. Together we can and will close the holes in our safety net of support and protection for vulnerable investors.

I am truly grateful for the chance to serve each and every one of you as NASAA’s 98th President. Over the course of the next year, we will carry NASAA’s mission of investor protection forward with renewed vigor, passion and commitment. Gracias – Merci – Thank you for letting me lead the way.

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