States Urge Congress to Reconsider Proposal That Weakens Investor Protection

WASHINGTON (July 10, 2003) — State securities regulators today voiced their strong opposition to a provision of the “Securities Fraud Deterrence and Investor Restitution Act” (H.R. 2179) that would significantly erode state investor protection efforts.

“State securities regulators, the Securities and Exchange Commission, and Congress share the same goal of protecting the nation’s 85 million investors. Yet Section 8(b) of H.R. 2179 handcuffs state securities regulators in our efforts to protect investors,” said Christine A. Bruenn, President of the North American Securities Administrators Association (NASAA) and Maine’s Securities Administrator.

Section 8(b) has the potential to limit state enforcement actions designed to protect individual investors. “Restricting the ability of states to tailor corrective actions to specific instances of misconduct severely limits state securities regulators and will have a chilling effect on us doing our jobs of protecting investors,” Bruenn said.

Bruenn explained that state securities regulators apply a variety of sanctions when taking enforcement actions against individual brokers or dealers, depending upon the specific facts of each case. “Remedial sanctions are an important enforcement tool in addition to restitution and monetary penalties,” she said.

“While we strongly support the provisions in H.R. 2179 to strengthen the SEC’s enforcement authority, we remain deeply troubled that this legislation will weaken and limit the efforts of state securities regulators to protect investors,” Bruenn said. “Given the current climate of corporate scandal and financial fraud, it should be clear that now is the time to strengthen, not weaken, our unique complementary system of state, industry and federal securities regulation.”

Bruenn’s remarks came after the House Capital Markets Subcommittee approved H.R. 2179 with a new amendment offered by Subcommittee Chairman Richard Baker (R-LA) and Rep. David Scott, (D-GA) that would preclude states from entering into even voluntary agreements with wrongdoers that would impose specific conduct remedies for the benefit of individual investors. The legislation now moves to the full House Committee on Financial Services.

“State securities regulators have a long record of success in protecting investors against financial fraud and abuse at the local level,” Bruenn said. “Pulling the plug on this powerful resource is an affront to each and every American investor. H.R. 2179 is important legislation and I urge Congress to make it even stronger by removing Section 8(b).”

For More Information:
Bob Webster, Director of Communications

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2003 Headlines, Newsroom