Franklin L. Widmann
Chief, New Jersey Bureau of Securities
President, North American Securities Administrators Association
October 2, 2004
NASAA 87th Annual Conference
Mr. President, distinguished guests, fellow regulators and my colleagues with the states, provinces, territories and the NASAA Corporate Office. I would like to thank you for this opportunity to address the 87th Annual Conference of the North American Securities Administrators Association.
In a few hours, I will officially assume my responsibilities as NASAA’s president. I look forward to the year ahead with enthusiasm for helping our association fulfill its mission of investor protection. I am indeed honored by the confidence the membership, as well as the Attorney General of New Jersey, the Honorable Peter C. Harvey, has shown in me to represent and protect the interests of more than 100 million North American investors.
Before I take the gavel, I want to thank the Conference Chair and Arizona Securities Director Matt Neubert, and everyone within the NASAA family for the time and energy you have devoted to make this year’s conference a success.
I also want to introduce NASAA’s leadership for the coming year.
I am excited to see several new members of our Board of Directors and I look forward to your new ideas for steps we can take together to strengthen our association and fulfill our mission.
NASAA’s new Board of Directors includes:
- President-elect Patricia Struck, of Wisconsin
- Past President, Ralph Lambiase, of Connecticut
- Fred Joseph, of Colorado
- Donald Murray, of Manitoba
- James Nelson, of Mississippi
- James Ropp, of Delaware
- Karen Tyler, of North Dakota, and
- Ryan Ushijima, of Hawaii.
When NASAA Presidents speak to the Annual Conference at this luncheon, they typically focus on the accomplishments of the previous year and the challenges and opportunities that face us as we move forward. But these are not ordinary times. Our economy and markets have been tested in recent years both by a series of scandals in the accounting, brokerage, and mutual fund industries, and by acts of terrorism at home and abroad. Investors are concerned about what they can do to protect the investments they have made to secure their financial futures.
For all the tasks that demand our attention, one calls on each of us – regulators and industry alike. I believe this is critical to our continued success and prosperity in North America. We must focus our priorities to help investors regain confidence in our financial markets. Together, we must honor our responsibilities to ensure that all investors are treated fairly. This theme will be the foundation of my presidency. After all, we are all in this together, and we each have to live up to our own responsibilities.
To that end, I call on the securities industry to continue to work with us to restore the integrity of our financial markets. Specifically, the industry should take every possible step to strengthen its supervision, not by simply complying with the rules, but by actually making sure that their employees comply with the law and put their customers’ interests ahead of their own.
When mutual funds, a bedrock investment for millions of middle-income investors, and analyst research, are suspect, investors no longer know where to turn or who to trust. And when investors take money out of the market and put it under their mattresses, or are tempted to invest in get-rich-quick-schemes to recoup their losses, all of us are harmed.
Unfortunately, as USA Today recently pointed out, investors, primarily small investors, often get no respect from Wall Street. USA Today financial writer John Waggoner recently wrote: “Increasingly, the message from Wall Street is that small investors need not apply . . . . Nearly every brokerage . . . has a special team that caters to the wealthy. Small savers, on the other hand, pay more for their investments, get little advice and often get the raw end of investment scams.”
Waggoner goes on to say that this simply “could be dismissed as the way the world works, except for one thing: Today`s small investors aren`t the stock dabblers of a few decades ago, who bought and sold stocks for the thrill of playing the market. They`re investors because they have to be. Their retirement depends on it.”
The people who invest in our markets include those who are retired, or just starting out raising a young family, or those putting their children through college. These investors must have confidence in our markets. If they do, they will continue to invest and our economies will grow and we will all prosper.
Both industry and regulators must strive to make sure that investors receive a fair shake. They must ensure that the marketplace is stable, which combined with a positive economic climate, encourages investors to invest not only for short-term gains, but to keep their money in the market over the long haul.
It behooves those in the North American securities industry to set the world standard in this regard, and to focus on the long-term success of our national economies and the financial health of future generations, not just short-term corporate or individual bottom lines.
I applaud SEC Chairman Donaldson’s recent remarks challenging corporate executives to do more to provide ethical leadership for their companies. We share a strong conviction that industry must have, in the Chairman’s words, “an internal code of ethics that goes beyond the letter of the law to also encompass the spirit of the law.”
Indeed, our financial markets must be fair and open, and those who sell for the firms must have a higher ethical responsibility than their own well being or that of their firm, so that all investors have confidence not only in the markets but also in the systems in place to protect their interests.
As I said at the outset, we are all in this together. The mission of state and provincial securities regulators is to protect investors, and we will do our part to fulfill our responsibilities to do all that we can do as regulators to ensure that financial markets provide for economic growth and offer a level playing field for all investors.
Specifically, we will continue to monitor the firms and agents, through our registration procedures. We will continue to conduct examinations of firms and review securities offerings to ensure compliance with state and provincial securities laws and regulations. We will continue to bring enforcement actions against those who would let their own self-interest take precedence over the public interest.
I’d like to turn now to a brief discussion of our NASAA responsibilities in three key aspects of our strategic plan: training, investor education, and enforcement.
NASAA is committed to providing a multitude of training programs for our membership. Providing knowledge and training is our responsibility and I will recommend to the NASAA membership that we continue to enhance our training programs as a core goal of the association.
In 2004 alone, NASAA is sponsoring 12 training seminars. In addition to annual training programs in the areas of broker-dealer regulation, investment adviser regulation, investor education, and corporation finance, NASAA holds an annual enforcement conference. These conferences and training seminars bring state and provincial regulators together to enhance their skills and knowledge. We also held the first-ever training session with the National Association of Insurance Commissioners to share information about laws and enforcement practices that can be put to practical use in combating securities fraud by insurance agents.
In the area of investor education, NASAA has been a leader and will continue to be so. Recognizing the importance of financial literacy to the prevention of fraud and abuse, NASAA’s Board of Directors elevated investor education to Section status in 1997 to help support the ongoing financial education efforts of state and provincial securities regulators. I will work to make certain that investor education remains a top priority of both NASAA and its members.
The Investor Education Section, along with a network of professionals from across the NASAA membership, has taken great steps to provide investors with useful resources to protect themselves from investment fraud.
For example, under the guidance of the Section’s Senior Outreach Project Group, we initiated a major education campaign aimed at senior investors. The Section also helped produce guides to help investors better understand Section 529 college savings plans and brokerage account statements. NASAA also has entered into an agreement with the Department of Defense through which NASAA members will work to deliver financial education to members of the military. NASAA will continue to develop the successful series of “NASAA Listens” Forums, which help to educate investors, industry and others. Developed under Ralph Lambiase, NASAA recently presented Forums on arbitation and Rule 12b-1 fees and more will be held in the months ahead.
Our investor education efforts are being recognized and are making a difference. Recently, NASAA was invited to participate in the meetings of the U.S. Treasury Department’s Financial Literacy and Education Commission. We will use this opportunity to collaborate with federal agencies and coordinate the many effective investor education programs of our membership.
In the area of enforcement, the states and provinces have a primary role to play. In the United States, as a matter of sovereignty, the states have a separate and distinct role to play in protecting investors, a role that Congress recognizes is different from that played by the SEC and membership organizations such as the NASD and New York Stock Exchange. As Senate Banking Committee Chair Richard Shelby recently noted, “[T]ime and again we have seen the need for vigorous state regulators to pursue investigations and enforcement actions.”
NASAA deeply appreciates the support of Members of Congress who have been champions for the rights and protection of investors. NASAA remains committed to working with Congress to ensure investor confidence in our markets and to protect the integrity of state securities regulation.
Simply put, the responsibility of protecting investors is too large to be handled by a single federal agency, and industry self-regulatory organizations. Investors need the protection of state securities regulators. As more investors turn to the market for their financial security, this responsibility is only going to grow.
That’s why NASAA will continue to forge close alliances with other stakeholders in the area of state financial services regulation to work together to advocate our positions on behalf of investors. I look forward to continuing our ongoing efforts with state and consumer groups such as the National Governors Association, the National Association of Attorneys General, the Conference of State Bank Supervisors, the National Association of Secretaries of States, AARP and other organizations.
Matters of sovereignty aside, with 100 million investors, the regulators cannot do it all, nor should we. Industry and regulators share a responsibility to protect investors. The securities industry is among the most sophisticated in the world and must not lose sight of the ultimate beneficiary – the capital markets and the investors that rely on them.
Our markets are respected around the globe for a reason. Investors believe they have historically been playing in a fair and open market. I call upon the securities industry to continue to work to demonstrate that this belief has not been misplaced; and to further enhance the quality of the marketplace, most specifically with respect to the behavior of employees who deal with the public on a daily basis and recommend or sell securities or investment advice.
I also urge the industry to continue strengthening its compliance and supervision efforts, not only at the major Wall Street firms, but especially at remote branch offices and smaller firms.
I have outlined the three key areas of responsibility for the year ahead – training, investor education and enforcement. As president, I will emphasize each of these areas at home and abroad, where I will continue NASAA’s outreach to the international regulatory community and advocate the need to develop cooperative information sharing programs, policies and laws as positive steps toward greater enforcement and protection from fraud. In particular, I look forward to forming closer relationships with our Canadian and Mexican members in these areas.
Before I conclude, I would like to speak directly to the members of the NASAA family. One of the most gratifying aspects of my career has been my association with you. Over the years, the opportunity to work on projects together with such an outstanding group of people has been unparalleled. The talent, dedication, and knowledge that the members of this association and their staffs bring into play on any given issue are remarkable.
From my own experience, I still marvel at the work of the research analyst task force. More than 40 states contributed to the investigations. The result was a major accomplishment that brought the states together to accomplish a common goal. It has truly been my honor to work with so many of you on so many different projects.
I would urge those of you who are new to the association or the ranks of state or provincial securities regulators to get involved in the work of NASAA. The work in itself is very rewarding and you get to “give something back.” In my own case, working my way up through the ranks of various project groups, committees, and sections was a great way to learn about the issues and to make a contribution.
I would recommend that you get involved, stay involved, and learn as much as you can from the experience. In the end, the most rewarding part isn’t the work, it is the people. Over the years, I have worked with many very talented and dedicated individuals, many of whom are in this room today. There is no substitute for the feeling of camaraderie and friendship that develops from those experiences.
In closing, I would like to thank the NASAA Board members, Section Chairs, Ombudsman, all the NASAA volunteers and the NASAA Corporate Office staff for your professionalism, integrity, support, and commitment to investor protection. It is an honor and my privilege to serve as your President.
In particular, I would like to thank my predecessor, Ralph Lambiase, who has always invited me to join him on whatever adventures within NASAA he was pursuing. His wise counsel and his inclusive nature, particularly over the last year, are sincerely and greatly appreciated.
For example, Ralph recently told me about the many ways to celebrate a 50th birthday, which I feel compelled to note happens to be today for me. He said I could go on a 50-day cruise around the world or, in the alternative, send him on a 50-day cruise. Instead, I’ve chosen to celebrate the occasion by accepting the responsibilities of leading NASAA through what I hope will be as successful a year as we’ve just enjoyed. I want to thank you and the Attorney General of New Jersey, Peter C. Harvey, for the opportunity to serve as NASAA President.
I look forward to working with all of you to continue to honor our responsibilities to ensure that all investors are treated fairly; to strengthen investor confidence; to retain state securities regulatory authority; to protect investors, and to maintain the position of our markets as the most efficient and respected in the world.
October 2, 2004