September 10, 2019
NASAA Annual Meeting
Thank you Mike for your generous introduction and for all you’ve accomplished this past year to advance our association.
I am humbled to stand before you today as president of the North American Securities Administrators Association.
I want to thank our host and conference chair, Texas Securities Commissioner Travis Iles and everyone at the Texas State Securities Board, for welcoming us to Austin, where we’ve heard outstanding speakers and panels.
Special thanks also to NASAA Executive Director Joey Brady and everyone in NASAA’s home office for all of their work behind the scenes to make this conference a success. As we all know, none of this happens without Joey and his extraordinary NASAA Corporate Office team.
Throughout this year’s conference, you’ve had an opportunity to learn more about all that NASAA has accomplished since we met in Anchorage, Alaska last September. This work reflects the vision and leadership of my colleague, Mike Pieciak, his leadership team and the tremendous army of volunteers in NASAA member agencies throughout North America that are the unsung heroes that often go unrecognized despite their countless hours serving on NASAA committees, project groups and task forces. This is what NASAA is all about. Our strength derives from a network of volunteers – public servants who have the best interests of investors at heart.
I am also honored to be joined by a team of outstanding securities administrators working together to serve and protect investors in the year ahead.
Now, it is my honor to introduce the new NASAA Board of Directors:
- President-elect Lisa Hopkins of West Virginia;
- Past President Mike Pieciak of Vermont;
- Bill Beatty of Washington;
- Andrew Hartnett of Iowa;
- Kevin Hoyt of New Brunswick;
- Travis Iles of Texas;
- Claire McHenry of Nebraska; and
- Tanya Solov of Illinois.
I look forward to working with each of you. Please join me in a round of applause for the NASAA Board of Directors. I am also pleased to announce the Section Chairs for the upcoming year:
- Leslie Van Buskirk will remain as chair of the Broker-Dealer Section;
- Melanie Lubin of Maryland is our new chair of Corporation Finance;
- Joe Borg of Alabama will lead our Enforcement Section;
- Alex Glass of Indiana will chair the Investment Adviser Section and
- Lynne Egan of Montana remains as chair of our Investor Education Section.
I am confident that the Sections will continue their strong work under the leadership of these committed Chairs. Please join me in a round of applause for our Section Chairs.
Now I’ve had an opportunity to meet many of you since becoming chief of the New Jersey Bureau of Securities. But for those who don’t know me, I’d like to tell you a bit about myself. I’m from New Jersey, born and raised. I’ve been an agent at a broker-dealer, a securities regulator, outside counsel to financial companies, a chief, and now a president. I have seen the securities industry and how it is regulated from multiple angles. And I do my best not to forget what it was like from the other side.
I’d like to share a story with you about a New Jersey couple. It’s a story that we have all heard before. But it is a story that I keep in mind as I go about my job. It’s the story of unsophisticated investors being ripped off.
This story is about a traveling textile salesman and school nurse in the early 1990s. Both had worked hard, saved money where they could, and were managing to successfully raise their three children. Through the years this couple had managed to set aside a moderate nest egg that they would use to pay for their children’s college when the time came.
One day they received a call from a broker. The broker was licensed with a registered broker-dealer. He promised that he could provide a greater return than the couple was receiving from their bank. Before the couple invested they wanted to meet the broker. So he went to the couple’s home. He sat at their kitchen table. He met their children. He promised the investments he was selling were safe. He promised it would pay a high interest rate. It was approved by the broker-dealer. The couple decided to invest the majority of their life savings.
Unfortunately, the product was a fraud. The couple had invested in one of the largest investment frauds ever – Bennett Funding. All told, investors were bilked out of more than $700 million.
The couple lost their investment. It was gone. They lost their financial security. They lost their ability to pay for their children’s college. The couple pointed fingers at one another. They second guessed their decision to invest in the markets. They were embarrassed. There were tears. The loss of their life savings had more than a financial impact.
Now you may be asking yourself, why I am telling you this story.
The reason is because that couple are my parents. I saw firsthand the impact of securities fraud. I reflect upon this experience in my daily responsibilities as a securities regulator and challenge you to do the same. Because what we do matters.
After graduation from law school, I began my legal career as a deputy attorney general representing the Bureau of Securities. I met victims like my parents and successfully tried securities fraud cases. I also participated in some of the Bureau’s and NASAA’s most successful multijurisdictional investigations, including auction rate securities cases.
In 2010, I left for private practice, where I conducted internal investigations and represented broker-dealers before various regulators, including the SEC, FINRA, and at least 12 state securities regulators. In 2017, I was privileged to return to government service in my current role as Chief of the Bureau – a job that I truly love and enjoy, and which I pursue passionately.
As NASAA’s president, I will bring this passionate commitment to strongly support and promote NASAA and our member state and provincial securities regulators as we fulfill our mission to protect investors and provide a strong regulatory framework for responsible capital formation.
NASAA is a great organization because of the strength of its members and the many individuals who generously volunteer their time because of their belief in the work and mission of our association. I appreciated the reference Craig Goettsch of Iowa made in our video to the fable of the bundled sticks. One stick is easy to break. A bundle of sticks is a far different story. There is strength in unity. And that speaks directly to NASAA. By working together through NASAA, state and provincial security regulators have accomplished much to protect investors throughout North America.
As regulators, the things we do matter. Chances are we may never meet many of the people we are helping – especially those who we have prevented from being victims.
Enforcement of state and provincial securities laws is at the heart of what we do every day. I look forward to working with Joe Borg of Alabama as he leads NASAA’s Enforcement Section and continues the section’s exceptional work from cryptocurrency-related investment matters to coordinating multijurisdictional cases.
Earlier in our conference you heard about a landmark multijurisdictional case from the early 1990s that helped put NASAA and its members on the map for bringing significant enforcement actions leading to restitution for harmed investors. That action was by no means a one-off. From the global research analyst settlement in 2003 to the auction rate securities settlements a few years later and other cases, more than $62 billion has been ordered returned to investors as a result of states working together through NASAA.
In addition to formal NASAA multijurisdictional enforcement matters, NASAA is instrumental in facilitating individual jurisdictions working together. For example, this summer securities regulators from Illinois, New Hampshire, Massachusetts and New Jersey worked cooperatively in bringing enforcement actions against an issuer that allegedly sold more than $47 million of unregistered securities to more 500 investors in more than 30 states.
Enforcement actions taken by state and provincial securities regulators send a strong message to those working in the financial industry that we take seriously the need for compliance with state and provincial securities laws.
I appreciate that most investment professionals are ethical, hard-working people who want to do the right thing for their clients. Whether they are helping young people and families prepare for their financial futures or working with pre-retirees and seniors to help them enjoy a financially secure and dignified retirement – the things you do matter.
Having experience both in the industry and as a securities regulator, I understand that no one wants bad apples working in their shops. So for those industry members here today, I urge you to continue strengthening your compliance and supervision efforts, because the things you do matter. Investors must have confidence in you in order to have confidence our markets. If they do, they will continue to invest, and our economy will continue to prosper.
We all have a common mission – working to help and protect investors. We might have different ideas on how we get there, but I want you to know that I have an open door policy and continue to look forward to hearing from you on how we can work together to help investors. Along with our Broker-Dealer Section Chair Leslie Van Buskirk of Wisconsin and Investment Adviser Section Chair Alex Glass of Indiana, I look forward to continuing to build upon the strong connections between regulators and industry representatives. When we work together, we have had great success, and I look forward to more successful collaboration to improve how investors are served and protected.
Investors, regulators and industry alike face many challenges in the year ahead. We continue to witness the greatest transfer of wealth between generations that our nation has ever seen. I thank Mike Pieciak for focusing attention on millennial investor awareness during his term and Montana Deputy Securities Commissioner Lynne Egan for directing our Investor Education Section’s work in this area.
At the same time senior population continues to grow, and with that growth comes the need for even more collaboration with financial professionals to protect an aging population. I commend Maine Securities Administrator Judith Shaw for all she’s done to lead NASAA in this vital mission.
This is also a pivotal year for the implementation of the SEC’s Regulation Best Interest and its related releases. Regulation Best Interest promised to better protect investors and align their expectations for the services and advice they receive from broker-dealers. NASAA will assess the rule’s implementation to track its progress toward delivering on that promise with tangible results for investors. I thank Ohio Securities Commissioner Andrea Seidt for leading NASAA’s new Regulation Best Interest Implementation Committee and look forward to the committee’s efforts to assist NASAA members in their interpretation and implementation of this regulation.
We also expect to be fully engaged in the SEC’s next significant regulatory initiative, reflected in its recent concept release on securities offering exemptions. The private securities marketplace today is dramatically different then when the existing regulatory framework was adopted more than two decades ago. Once comprising just a fraction of the overall marketplace, private securities today serve as a major source of investment capital for certain businesses, exceeding public markets by as much as two-to-one.
Unfortunately, many private offerings that become available to accredited, but still retail investors, are low-quality investments with high commission costs with far less transparency than offering sold in the public markets. As the only regulators with an office in every state or province, NASAA members frequently receive complaints from those who are victimized in offerings conducted under Rule 506, and private placements are commonly listed on NASAA’s annual list of top investor traps.
NASAA agrees that there should be a comprehensive review of securities offering exemptions. Markets need cohesive policies that balance investor protection and capital formation. But the expansion of avenues for capital formation, must not come at the expense of investor protection.
I look forward to working with NASAA’s Corporation Finance Section under the leadership of Maryland Securities Commissioner Melanie Lubin on this important investor protection issue.
I also look forward to having constructive discussion with the SEC on this and many other important issues. I also look forward to working with our colleagues at FINRA on how we can work collaboratively on initiatives to advance investor protection. Protecting investors requires all hands on deck. We may not always agree, but that does not mean we cannot put differences aside to work toward our common mission of investor protection. Because the things we do matter.
I find strength in knowing that I am not in this alone in all of this. NASAA would not be as effective without the dedicated efforts and exceptional work of the team in its Washington, DC office led by Executive Director Joey Brady. These individuals work tirelessly to support the mission by maintaining the flow of information that is vital to keeping all jurisdictions informed and by coordinating the efforts of NASAA members, which is so important to the continued strength and relevance of local securities regulators.
I thank the NASAA membership for your confidence in me. I also thank NASAA’s Board of Directors and Section Chairs. We have a lot of work ahead and I am eager to get started.
I could not afford to lead NASAA without the support of a strong leadership team in New Jersey, especially Attorney General Gurbir Grewal and Division of Consumer Affairs Director Paul Rodriguez. And I certainly could not lead NASAA without the hard work and dedication of the team at the Bureau of Securities, especially deputy bureau chief Amy Kopleton, Stephen Bouchard, Susan Largman, John Sueberth, and many others.
I would also like to acknowledge a dear friend and mentor, a former NASAA member and New Jersey’s former Enforcement Chief for more than 27 years Richard Barry.
Above all, I thank my wife Sandra and our children without whom I certainly wouldn’t be where I am today.
Throughout my term as NASAA’s president I will represent and advance the strong, united voice of the association, not that of any single jurisdiction, including my own. As NASAA’s president, I will work my hardest to ensure that NASAA advances its history of investor protection. I am committed to see that NASAA remains a vibrant and successful organization that engages all members, especially newly appointed administrators, to ensure that our deep bench takes NASAA into its next 100 years knowing that what we do matters.