(May 21, 2003) – “We support more resources and investigative powers for the SEC, as this legislation would provide,” said Christine Bruenn, president of NASAA and director of the Maine Office of Securities. “More and better-equipped cops on the securities beat can help restore confidence in our markets.
“However, we’re troubled by the description of the language in Section 8. First, we’re uncertain about its constitutionality under our system of federalism. The published summary indicates this legislation could have the impact of undermining state regulators’ ability to determine the best course of action in a particular case and limit elected state officials’ determinations about how to appropriate and allocate fines imposed under state law.
“Second, depending on the exact language, it could serve to undermine the traditional role of the states as an early warning system for fraud – a role the states played in fighting microcap stock fraud, pointing out abuses by day-trading firms and in highlighting the conflicts between research and investment banking on Wall Street.
“State regulators routinely return restitution to harmed investors. Last year, for example, state enforcement actions resulted in $309 million in restitution for investors. It’s difficult to return meaningful restitution in the global analyst settlement because it is a fraud on the market. It would be unfair to return funds to some investors because they were easier to identify and not to others when all investors suffered losses. For example, the investor who saw a research report on TV, which led to a stock purchase, was harmed as much as the investor who had an account with the firm that issued the report.
“The goal of regulators is more than simple restitution. If someone steals your car, you should get your car back and the thief should pay a price – either a fine or jail time or both. We’re concerned that one interpretation of the language released today could result in the thief being forced only to turn the car over to the cops and the car being towed to Washington, where someone will try to figure out who the owner is.
“State regulators will oppose any legislation that undermines our ability to bring enforcement cases under our state laws and to fashion remedies that are best for our citizens.”
For More Information:
Bob Webster, Director of Communications