Senate Banking Committee Examines Important Role of State Securities Regulators in Protecting Investors
WASHINGTON (June 2, 2004)—In testimony before the Senate Banking Committee, state securities regulators today highlighted the important role states play in protecting investors, whether from abusive mutual fund and variable annuity sales practices or back-office boiler-room operators pitching fly-by-night investment scams.
“State securities administrators share a common passion for protecting citizens from investment fraud and abuse,” said Ralph A. Lambiase, Director of the Securities Division of the Connecticut Department of Banking and President of the North American Securities Administrators Association (NASAA), Inc., 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, Canada, and Mexico.
Lambiase stressed to the Committee that state securities regulators are committed to working with their counterparts at the Securities and Exchange Commission and self-regulatory organizations to protect investors and cited the success of the research analyst cases of 2002-2003 and the more recent investigations of the mutual fund industry as evidence of the complementary state/federal regulatory system. “These collaborative efforts have helped and continue to help restore investor confidence in our financial markets,” he said. “Protecting investors is a significant challenge and no single regulatory agency can go it alone. When it comes to investigation and enforcement of securities wrongdoing – Investors are demanding more cops on the beat, not fewer.”
Earlier this year, Congress removed federal preemptive provisions from H.R. 2179, the “Securities Fraud Deterrence and Investor Restitution Act of 2004.” Lambiase urged the Committee to reject similar proposals to preempt state regulatory authority. “Protecting investors against fraud and punishing those who would commit fraud are fundamental roles of government, be it federal, state, or provincial,” he said.
Joseph P. Borg, Alabama Securities Director and Chair of NASAA’s Enforcement Section, told the panel that states have compiled an impressive record in bringing enforcement cases, including criminal prosecutions. Based on preliminary results of a NASAA survey for the 2002-2003 reporting period, states filed a total of 2964 administrative, civil and criminal enforcement actions; assessed $822.3 million of monetary fines or penalties; collected $660.1 million in restitution, rescission and disgorgement and sentenced criminals to more than 717 years of incarceration.
“State securities regulators are dedicated to pursuing those firms and individuals who have violated the securities laws,” Borg said. “We will fight to ensure that state securities regulators maintain the authority to regulate at the local level and bring enforcement actions with appropriate remedies against those firms that violate securities laws in their jurisdictions.”
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