DENVER (September 15, 2009) – The incoming president of the North American Securities Administrators Association (NASAA) outlined a broad policy agenda to promote and enhance the investor protection role of state and provincial securities regulators.
“As a career public servant, I believe that regulation is the proper province of government. It is not a profit-driven business and cannot be subject to a traditional cost-benefit analysis. NASAA Members are all true believers in the demonstrated power of state and provincial securities regulators to protect our citizens from fraud and abuse. It is the passion for our mission that is crucial for our success,” Texas Securities Commissioner Denise Voigt Crawford said in a speech during the 92nd annual NASAA conference.
Reflecting on the anniversary of the worldwide financial crisis, Crawford said the world has gained a new appreciation of the importance of sound financial regulation. “Virtually all developed countries are reforming their financial regulation, which failed to identify, much less rein in, unlimited risk-taking, industry practices based upon flawed economic models, and the inability or unwillingness of national governments to address these matters,” she said. “While this catastrophe was the result of many failures, I am very proud to say that a failure of state securities regulation was not one of them. In the last few years, it has been state and provincial securities regulators who have been at the forefront of investor protection. Our record demonstrates clearly that we have the will and ability to regulate.”
Crawford said NASAA will continue to seek to influence the direction of financial regulatory reform “so that it works for, not against, investors” and noted the support the Obama Administration has shown toward state regulators.
“A one-size fits all model of regulation is not the best model. It results in an insular culture that stifles creative regulatory insights and responses. It also invites regulatory capture by becoming too closely aligned with the industry it is set up to regulate,” Crawford said. “A large, overly centralized regulatory scheme can also get bogged down in bureaucracy and become slow to act.”
Crawford noted that state and provincial securities regulators are decentralized, directly accountable and respond swiftly to complaints from investors. “This was illustrated most recently in how we handled the auction rate securities investigations. We were quick, innovative and aggressive. These are the hallmarks of effective regulation and are typical attributes of NASAA members,” she said.
Crawford said NASAA will focus in the coming months on several areas of investment adviser regulation. These issues include the extension of the fiduciary duty standard to all financial professionals who give investment advice regarding securities; increasing to $100 million the threshold for state-regulated investment advisers from the current $25 million assets under management limit; and advocating on behalf maintaining state and federal jurisdiction for the regulation of investment advisers. “A self-regulatory organization for investment advisers is inappropriate since it embodies a flawed approach to regulation because a self-regulatory organization is inherently conflicted and is not independent,” she said.
Crawford also said NASAA will renew its call for the end to mandatory, industry-run arbitration for investors. “The harmful effects of mandatory arbitration have been well-documented in numerous studies. Both houses of Congress have responded with legislation that would prohibit the use of mandatory arbitration clauses in a wide range of consumer services, including securities. No further studies are necessary,” she said.
Crawford also announced NASAA’s new Board of Directors, including: Past President, Fred Joseph, Colorado; President-Elect, David S. Massey, North Carolina; Secretary, Rick Hancox, New Brunswick; Treasurer, Mark Connolly, New Hampshire; Chris Biggs, Kansas; Joe Borg, Alabama; Bruce Kohl, New Mexico; and Melanie Senter Lubin, Maryland.
The complete text of President Crawford’s speech is available on the NASAA website here.
NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.
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