Remarks of NASAA President Mike Rothman Delivered to NASAA 2017 Public Policy Conference

NASAA President and Minnesota Commissioner of Commerce Mike Rothman
May 9, 2017
Washington, D.C.

Good afternoon everyone! I wish I could be with you today. But in Minnesota we are in leadership budget talks here. Thankfully, modern technology can beam me there. Before introducing our keynote speaker, I’d like to share with you some of my thoughts about NASAA and where we are as an organization today.

First, I’d like to give a big thank you and please help me with a round of applause to Claire McHenry for organizing a strong and very timely agenda for this year’s conference.  Thanks also goes to the folks behind the scenes at NASAA for helping pull everything together.

I also greatly appreciate Commissioner Piwowar and Commissioner Stein for your engagement and participation with us today. We look forward to continue to work with you and the SEC staff over the years ahead.

We all have been working very hard in NASAA. Our outstanding staff at NASAA can attest to how busy we really are. It’s hard to believe, but I’m now mid-way through my term as NASAA’s president. We’ve accomplished many of our top agenda items for this year, and have much more to do. It all starts with a very ambitious agenda, not to mention new opportunities and challenges as we navigate a little turbulence in Washington D.C. So here’s where we’ve been, and where we’re going.

In September, I set out a strong vision for moving NASAA forward by strengthening its foundation and building up our association of state and provincial members.  I am very pleased to report that we’ve made significant progress.

First, we have achieved greater collaboration with other regulators. In February, then-Acting SEC Chairman Michael Piwowar and I signed a Memorandum of Understanding on behalf of NASAA and the Securities and Exchange Commission, which is intended to facilitate greater sharing of information between state and federal securities regulators. This is a key initiative as we continue to explore additional ways to collaborate in carrying out our mission to protect investors and the integrity of the financial markets. We also are very pleased that SEC Chair Jay Clayton was able to be join us this morning for an informal meet and greet, and we look forward to continuing our dialogue on ways NASAA and the SEC can continue to collaborate to build on our strengths.  We’ve also had helpful meetings with FINRA’s leadership, including Robert Cook and senior staff as we work on topics of mutual concern and interest.

Second, on March 1, 2017, we held our third annual Capital Formation Roundtable in Washington, DC. The Roundtable provides NASAA with an opportunity to meet with outside stakeholders, including investor advocates, industry trade representatives, corporate finance counsel, business owners, and academics. The 2017 Roundtable topics ranged from Crowdfunding, Regulation A and General Solicitation, Broker-Dealer Regulation and Secondary Trading, to Fintech and Financial Services. Sebastian Gomez Abero, Chief of the Office of Small Business Policy within the SEC Division of Corporation Finance, and Rick Fleming, the SEC’s Investor Advocate, both participated in this year’s Roundtable.

Third, we continue to speak with a firm voice on the strengths of state- and provincial-based securities regulators. NASAA has a very distinguished history – with a strong record of helping its members fulfill their responsibility to protect investors and ensure financial-market integrity. It is no exaggeration to say that NASAA’s mission has never been more important than it is today.

We are living in an ever-changing and ever-more-complex financial world. It is a world that constantly presents new challenges to investors – and also new challenges to us, as regulators. The most recent challenge comes in the form of the Financial CHOICE Act of 2017. This proposal, which moved quickly through the House Financial Services Committee, would, if enacted in its current form, dramatically change regulatory policies in the wrong direction. It also would weaken important reforms and protections put in place by the Dodd-Frank Act in response to the financial crisis, and expose investors and the securities markets to significant, unnecessary and new risks.

It is clear that the changes contemplated by the bill would significantly undermine and compromise the ability of regulators to effectively enforce financial laws and regulations.

By attempting to reverse so many critically important reforms, this legislation aims to sweep away in one stroke scores of essential protections and modernizations to our financial regulatory architecture that were literally decades in the making.

NASAA strongly opposes the proposal’s Section 391, which would mandate the adoption of policies governing the coordination of state and federal enforcement actions. This proposed requirement is overbroad, misguided, and perhaps even unworkable given Supreme Court precedence. At the very least, it is unnecessary and potentially very disruptive in the realm of securities regulation given that state and federal securities regulators already collaborate on a voluntary basis to share information and leverage resources efficiently. The new SEC-NASAA MOU is a perfect example of our ongoing and voluntary collaboration.

Our message to Congress is simple and clear: Please continue your commitment to protecting investors and do not undermine the important and overdue reforms implemented in the wake of the financial crisis, either directly through legislative repeals, or indirectly through a lack of appropriate funding or delayed execution. It remains incumbent upon members of Congress and regulators to demonstrate an unwavering commitment to Main Street investors and continue to take the steps necessary to protect them.

Next, regulators and industry alike face other challenges as part of our day-to-day work. Two of those challenges – cybersecurity and protecting senior investors and vulnerable adults – are top priorities for NASAA.

Cyberattacks have become one of the greatest threats globally to our financial sector. It is an issue for firms of all sizes, and a growing issue for securities regulators at all levels.  NASAA recently delivered a toolkit to our members to help them raise awareness among state-registered investment advisers of the dangers of ransomware. To better coordinate our cybersecurity efforts, I have asked the chairs of NASAA’s Board-level Cybersecurity Committee and the Investment Adviser Section’s Cybersecurity and Technology Project Group to plan and conduct a cybersecurity roundtable. The roundtable will be held in June and will bring together experts to discuss critical cybersecurity issues for regulators.

As for seniors, NASAA and its members have long focused on protecting seniors and vulnerable adults from financial exploitation. NASAA ramped up its efforts this past year by providing new and innovative tools to help our members and industry in this important effort, and this work continues. For example, we are working on many fronts right now:

At the state level, we are working on legislation based on or inspired by the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation. It has been enacted in nine states, including six this year. Many others (including my state) continue to work on enacting similar legislation. At the federal level, we’ve seen the reintroduction of the Senior$afe Act and its subsequent inclusion in the Financial CHOICE Act. While NASAA has concerns about a number of provisions in the CHOICE Act, I think we can all agree that it is time to see Senior$afe enacted into law at the federal level.

NASAA also released its guide for industry practices and procedures for protecting senior investors and vulnerable adults from financial exploitation. And work is nearing completion on a study of broker-dealers to assess their current practices and procedures relating to seniors.

NASAA members also have trained more than 700 industry professionals through our Senior$afe training program. Next month, we will hold our second Senior$afe Training Week nationwide from June 11-17 in conjunction with World Elder Abuse Awareness Day.

I also must commend our folks who are working to strengthen our multijurisdictional and enforcements matters, our broker-dealer concerns, the investment adviser issues, and our investor education and outreach team.

At NASAA, we have a strong and dedicated membership throughout North America, working every day to protect investors, ensure responsible capital formation, and tackle the next generation of securities challenges.

In closing, it has been a pleasure to share a few minutes and a few thoughts with you. As NASAA president, I will continue working as hard as possible to build on NASAA’s strengths and accomplishments . . . to focus on making NASAA even stronger in our service to our state and provincial members … and, above all, stronger in supporting our responsibilities to protect the investing public.

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