WASHINGTON, D.C. (July 1, 2020)—The North American Securities Administrators Association (NASAA) announced today that its Board of Directors has approved the release for public comment of a proposed model act to assist states in creating a restitution assistance fund for victims of securities law violations.
“The intent of this model legislation is to provide financial assistance to victims of securities law violations who were awarded restitution but have not received full payment,” said Christopher W. Gerold, NASAA President and Chief of the New Jersey Bureau of Securities.
Among other provisions, the model act would establish a state securities restitution assistance fund, outline eligibility requirements for victims seeking restitution assistance, set payment caps on the amount of restitution assistance awards, prohibit and forfeit awards in certain circumstances, and provide for recovery mechanisms. The model provides that restitution assistance awards are capped at the lesser of $25,000 or 25% of the amount of unpaid restitution awarded, or the lesser of $50,000 or 50%, if the victim is a vulnerable person, subject to waivers for good cause.
The Act draws upon similar legislation in Indiana, Montana, Vermont, Kansas and Maine. Gerold noted that Indiana and Montana enacted this type of legislation nearly a decade ago and have reported that their restitution assistance programs are successful.
Indiana was the first state to establish a restitution fund. Since the inception of its fund in 2010, Indiana has paid approximately $1 million in restitution assistance awards to 102 claimants. Montana, which established its fund in 2011, has paid $1.6 million to 118 claimants. The average amount of the awards was $10,000 in Indiana and $13,631 in Montana. The average recipient was 64 years old in Indiana, and 82% of recipients were over 60 years old in Montana.
“In many cases, victims of securities fraud are only able to recover pennies on the dollar. This model legislation would give state securities regulators the ability to provide greater financial relief to victims, which is particularly important to seniors and other vulnerable adults living on a fixed income,” Gerold said.
The proposed model act was developed by NASAA’s Board-level State Legislation Committee led by Montana Deputy Securities Commissioner Lynne Egan, and its Restitution Assistance Working Group, led by Karla Black, Deputy Securities Administrator and General Counsel with the Maine Office of Securities.
The proposed model act is included in the Notice of Request for Public Comment on the NASAA website here.
The proposed model act is open for public comment through July 31, 2020. At the close of the comment period, comments will be reviewed to determine if any revisions are required to the proposed model act before it goes to the NASAA membership for a vote to adopt, likely during NASAA’s annual meeting in September. Upon adoption it would be made available to NASAA members for consideration in their jurisdictions. Depending on the individual jurisdiction, the act may be adopted as legislation during state legislative sessions or implemented by regulation.