Download: NASAA Statement as Prepared for Delivery

WASHINGTON, D.C. (May 26, 2020) – The North American Securities Administrators Association (NASAA) today told Congress to guard against proposals to weaken securities laws as it continues to craft legislative responses to address the effects the novel coronavirus COVID-19 is having on the nation’s capital markets.

“It is important to remember that neither the securities laws nor the functioning of the capital markets is the root cause of the present economic distress. Prior to the pandemic, the securities laws and our capital markets were serving their intended purposes – the protection of investors and allocation of investment capital. This has remained true during the height of pandemic and remains true today,” said NASAA President Christopher W. Gerold.

Gerold’s remarks came during a roundtable discussion convened by the House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets to examine the impacts of the COVID-19 pandemic on U.S. capital markets. “Now more than ever, Congress must support and work in partnership with state securities regulators to keep fraud out of our capital markets,” Gerold told lawmakers.

Noting that the nation’s securities markets and most financial services firms continue to function capably and without significant interruption, Gerold said Congress “should be very skeptical of proposals that would weaken the securities laws in the name of the crisis.”

Speaking on behalf of state securities regulators, Gerold offered three principles Congress should prioritize as it contemplates additional legislation in the aftermath of the pandemic.

• First, Congress should support increased transparency in the private marketplace. In 2018, the SEC estimated that approximately $2.9 trillion was raised through exempt offerings, surpassing the capital raised in the public markets. Yet we know very little about how these markets function.
• Second, Congress should seriously consider imposing a “pause” on major SEC rulemakings especially efforts designed to expand private offerings and private markets. Gerold said that despite significant investor protection concerns from state securities regulators and others, the SEC appears intent on proceeding with a de-regulatory agenda. “This is baffling and should concern the Committee,” Gerold said.
• Third, Congress should continue and, where necessary, expand disclosures by public companies. “Our public markets themselves remain invaluable because they are transparent and well-regulated – they are the gold-standard for investors across the globe,” Gerold said.

NASAA  also submitted a series of legislative recommendations to Congress. Included in the materials are recommendations on a draft bill that would make important technical correction the “Senior Investor Protection Grant Program” and empower states to ramp up “Main Street” investor protection during the pandemic.