Colorado Securities Commissioner
President, North American Securities Administrators Association
September 17, 2008
NASAA 91st Annual Conference
Las Vegas, Nevada
Madame President, distinguished guests, fellow regulators, my colleagues in the United States, Canada, and Mexico as well as the NASAA Corporate Office, thank you for this opportunity to address the 91st Annual Conference of the North American Securities Administrators Association.
I would like to begin my comments today with a quote from the movie, The Blues Brothers: “We’re on a mission from God.” Jake and Elwood got it right – we are on a mission.
All of us – regulators and industry alike – are on a mission to serve the best interests of investors. We are on a mission to help investors throughout North America maintain their confidence in our securities markets. We are on a mission to educate and inform investors so that they can make appropriate financial decisions. And we are on a mission to protect investors from those who seek to cheat them of their hard-earned savings.
NASAA members are on this mission because we believe that every investor deserves protection. For example, this includes a cease and desist order issued by Hawaiian securities regulators to stop an unregistered oil and gas scheme. It includes civil penalties and prison sentences for those individuals who defrauded 8,000 South Carolina investors out of $275 million in an investment scheme. And it includes an investigation by securities regulators in British Columbia and Manitoba of a company claiming to offer an 87% return on investment.
In each of these examples and many more, NASAA member jurisdictions have stepped in to help and to protect investors. Day in and day out, the professionals working in state, provincial and territorial securities agencies throughout North America carry out their mandate of investor protection with dedication and commitment.
Whether through your expertise in registration or examinations, investigations or education, all contribute to the mission.
As I said at the outset, we are all on a mission – regulators and industry alike. I view the mission of the securities industry as helping investors reach their long-term financial goals, whether that is a down-payment for a first home, a college education, care for an elderly family member, or a financially secure retirement. The industry can help fulfill this mission by taking every opportunity to strengthen its compliance and supervision efforts, not only at the major Wall Street firms, but also at small firms and remote branch offices where many Main Street investors do business.
Today, I bring only one message and yes, you already know what it is – We’re on a mission!
It is not my intent to shift the direction of NASAA in the upcoming year. In fact, it is my intent to build on the accomplishments achieved over the past years under the leadership of my predecessors, Karen Tyler, Joe Borg, Patty Struck and Frank Widmann to make sure that the importance of our mission is understood by those who seek to change the financial services regulatory structure.
I am grateful that I will not shoulder this effort alone. It gives me great pleasure to introduce NASAA’s leadership for the coming year. NASAA’s new Board of Directors includes:
- President-elect Denise Voigt Crawford, of Texas;
- Past President, Karen Tyler;
- Chris Biggs, of Kansas;
- Joe Borg, of Alabama;
- Glenda Campbell, of Alberta;
- Melanie Lubin, of Maryland;
- David Massey, of North Carolina; and
- Michael Stevenson, of Washington.
I look forward to working together with all of you to strengthen our association and fulfill our mission.
Reporting to the Board will be the chairs of each of NASAA’s five sections, each of which is dedicated to strengthening the effectiveness and efficiency of state and provincial securities regulation.
NASAA’s Broker-Dealer Section will continue to be under the leadership of Arizona Securities Director Matt Neubert. Jack Herstein, my colleague from Nebraska, will head the Corporation Finance section. Delaware’s Jim Ropp will continue to lead NASAA’s Enforcement Section. NASAA’s Investment Adviser Section again will benefit from the leadership of Wisconsin’s Patty Struck. And my colleague from New Mexico, Bruce Kohl, will lead NASAA’s groundbreaking work to educate all investors as chair of the Investor Education Section.
In addition, I want to take this opportunity to spotlight the work of two NASAA Board-level Committees.
Under the direction of Bill Reilly from Florida and Mike Huggs from Mississippi, NASAA has embarked on a mission to enhance the efficiency and effectiveness of state securities examiners as they conduct examinations of broker-dealers and investment advisers within their jurisdictions through the development of the NASAA Electronic Examination Modules database project, known as NEMO. We anticipate that our examiners will find NEMO to be a significant enhancement to this vital role of state securities regulation.
Similarly, under the leadership of Washington’s Mike Stevenson and Mark Connolly of New Hampshire (and new Corporation Finance Section Chair Jack Herstein), NASAA is well positioned to begin developing a system that will enable the electronic filing of Form D, a process that we believe will create an efficient, streamlined system that will satisfy state filing requirements of the form used to give notice of offerings under Regulation D. Our nation’s capital markets will benefit from this uniform and effective regulatory tool and we look forward to the completion of “one-stop” electronic filing of Form D.
While the work of our Sections and their project groups is at the core of NASAA’s structure, I’d be remiss if I did not mention that none of their efforts would be realized without the support of NASAA’s dedicated Corporate Office staff in Washington.
NASAA periodically collects data from our members to determine the nature and number of cases we are dealing with and the outcomes we are achieving for investors within our jurisdictions. I’d like to share some results from our most recent survey with you today. These numbers reflect just 39 jurisdictions reporting. Still, they are telling. NASAA members conducted more than 6,600 investigations for the 2006/2007 reporting period. These investigations resulted in 2,276 enforcement actions, which in turn, resulted in $616 million ordered returned to investors, $55 million assessed in penalties, and helped secure more than 1,000 years of jail time.
While these are interesting statistics, let me personalize it a bit. The following is a voice message left by an investor for one of my investigators. This investor received settlement funds from a civil action in Colorado on one of our unregistered oil and gas cases. The settlement resulted in a return of 75 cents on the dollar to investors:
Hi, Mr. Price…I just received the check for the Key Resources distribution of recovered funds and I just am thrilled… I just want to thank you so much for your due diligence on this. You can’t believe what a difference this is going to make. It’s just wonderful. So, I thank you. Please pass on thanks to whoever else helped get this done. You have my entire gratitude. Thank you.
This is why we do what we do. Every day Main Street investors, just like this one, are helped by state and provincial securities regulators. That said, I want you to know that I have a concern. When I think about these numbers – and the people they represent – I become concerned whenever I hear the term “regulatory reform” and how said reform would affect state securities regulators and our ability to protect investors.
Over the past year, a number of plans have been floated around Washington pointing in the direction of regulatory change. Add to that the economic problems and market turbulence of this past year; and it is a certainty that some form of regulatory reform plan will be advanced in Congress.
NASAA is committed to working with the new Congress and Administration to protect the integrity of state securities regulation and deeply appreciates the support of Members of Congress who are champions for the rights and protection of investors.
NASAA and its members will continue to speak with a unified and clear voice when we say that the interests and protection of Main Street investors must remain the centerpiece of the financial services regulatory system. While the current financial services regulatory system should be reexamined, any changes to this structure should not come at the expense of investor protection, which state securities regulators have provided for nearly 100 years.
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. To do that, I ask for your help.
In particular, I ask NASAA members to continue your dedicated work to see that all investors affected by the auction rate securities fallout are provided relief in a timely manner. I applaud the efforts of the 12-state Task Force, which to date has conducted investigations that have produced settlements promising more than $50 billion to be returned to investors. I would also take this opportunity to thank the securities firms that have agreed to provide the much-needed liquidity to small investors and businesses.
I also ask state securities regulators to build on the momentum generated by the adoption of the NASAA Model Rule on the Use of Senior Designations and Certifications.
Late last month, the NASAA Model Rule was approved by the California legislature and currently awaits the governor’s signature. Once signed into law, California will become the second state, after New Hampshire, to adopt the NASAA Model through legislation. To date, Virginia, Washington and Wisconsin have adopted the NASAA Model Rule through regulation. Also, 11 states including Alabama, Colorado, Florida, Georgia, Iowa, Kansas, Maine, Missouri, Montana, New Mexico and Texas have proposed adopting the NASAA Model through rules later this year. I urge all NASAA members to move to uniformly adopt these important protections for seniors in the months ahead, whether through legislation or regulation.
I understand that the responsibility of protecting investors is too large to be overseen solely by a single federal agency, by one industry self-regulatory organization, or by state securities regulators alone. Investors need the protections provided by state, federal and industry regulatory organizations, working in a collaborative, coordinated and cooperative manner with one another. And this will prove especially true in the years ahead as more investors turn to the securities markets to achieve their long-term financial goals.
That is why I look forward to enhancing the strong dialog and cooperation between NASAA, the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA). The most recent example of the success of this cooperative regulatory approach has been in the fight against senior investment fraud. Next week, I will join representatives from the SEC and FINRA, as well as other groups at the third annual Senior Summit in Washington and I anticipate that this will be just the first of many discussions we will have in the months ahead as we continue in our mutual efforts to protect all investors. Also, I will seek and encourage opportunities to strengthen our relationships with other regulators and in particular, state insurance regulators, for the purpose of protecting investors.
Before I conclude, I would like to speak directly to the community of state, provincial, and sovereign securities regulators gathered here today. Our jobs are unique. Where else can you work and know that you have at least one friend in every state, province, or territory in North America? That’s how I view each of you – as friends.
I opened my remarks with a video clip from The Blues Brothers, which happens to be one of my favorite movies. Car crashes and great music aside, to me, that movie is about friendship, loyalty, and a quest against long odds to do what’s right.
Throughout my NASAA career, I have appreciated the friendship, professionalism and dedication of my colleagues throughout the United States, Canada, and Mexico. To the new members of our association, I encourage you to get involved in the work of NASAA and stay involved. If you are like me, I am sure you will find the experience not only professionally, but personally, satisfying.
I want to thank the Conference Chair and Arizona Securities Director Matt Neubert as well as Securities Director Gary Abraham with our host State of Nevada, and everyone within NASAA for the time and energy you have devoted to make this year’s conference a success. Thanks also to the NASAA Board of Directors, Section Chairs, Ombudsman, all the NASAA volunteers and the NASAA Corporate Office staff for your dedication and service in the name of investor protection.
I look forward to the year ahead with enthusiasm for helping our association fulfill its mission of investor protection. I am honored by the confidence the membership has shown in me to represent and protect the interests of more than 100 million Main Street investors.
I would like to end my comments as I began: We’re on a mission. We are all here to do what is right for investors. Thank you.
September 17, 2008