September 13, 2016
NASAA Annual Conference
Providence, Rhode Island
Hasn’t this been a terrific NASAA conference? Our speakers highlighted the necessity of diversity and inclusion initiatives. I encourage all of us to continue this important dialog.
Thank you Deputy Director Maria D’Alessandro for your hospitality and leadership here in The Ocean State of Rhode Island.
I wish to thank everyone involved in organizing this year’s Annual Conference and making it such a great success, including our presenters and speakers – in particular, SEC Chair Mary Jo White.
Chair White’s insights are invaluable, particularly our shared perspective on expanding federal and state relations, and views on “Diversity in Today’s Financial Marketplace.”
Let me pause for a moment to call for strengthening our commitment to collaboration among all securities regulators – federal, state and provincial. Collaboration and working together is critical because we must achieve our common regulatory imperative and mission:
to protect investors from fraud and abuse,
maintain fair and efficient financial markets, and
support responsible capital formation to make a better economy.
I also want to acknowledge and thank industry representatives and other stakeholders who have joined us for our Annual Conference.
I am honored and humbled to be addressing you as NASAA’s new president. And I am very grateful to NASAA members for your trust and confidence in granting me this amazing opportunity.
As I take the baton from Judy Shaw, I want to thank her for her exceptional leadership during the past year. The amount of days and hours she committed to this position has set a high bar for all of us.
I also want to thank this past year’s officers, board members, committee and section chairs, and project group members.
It is very reassuring to take on the president’s responsibilities knowing that NASAA has enjoyed such strong leadership at all levels.
I also want to thank Executive Director Joey Brady and each of the hard-working staff members at NASAA for everything they do, day in and day out, to lead and manage this organization so effectively.
Finally, I wish to thank my wife Shari who is here with me today and my family for allowing me the time for my job and taking on this responsibility. I also would not be able to do this without my great staff and support in the agency. Thank you to all of you.
WHO WE ARE
As many know, NASAA is the oldest international organization dedicated to investor protection. For nearly a century, NASAA has been the voice and support organization of state and provincial securities regulators.
The first state securities law – known as the “blue sky law” – became effective in Kansas in 1911. It was evident then that it was necessary and proper to organize and join forces to “protect the people … from fakers with worthless stock to sell,” as the founder of securities regulation, Kansas Commissioner Joe Dolley, said at the time.
NASAA members continue to serve this mission today. And while securities markets are now global, securities are sold locally by professionals licensed in every state and province where they conduct business.
Securities markets and products have grown in complexity, but most fundamentals are the same today as they have been for the last 100 years. And so are the challenges.
For example: 1919, the year that NASAA was founded, was also the year that a man named Charles Ponzi devised a new investment scheme that promised clients fantastical returns. In reality, it was a total fraud and, unfortunately one among many that persist to keep regulators like us very busy every day.
NASAA has and will continue to play a critical role in bringing together and supporting state, provincial and territorial securities regulators from across the United States, Canada and Mexico to address the challenges that will come our way next year and in the years to come.
Together, our members offer a deep pool of experience and expertise, responsive to our local communities and with deep-seated dedication to public service.
I am honored to have you all as my friends and colleagues.
NASAA’S NEW LEADERSHIP FOR 2016-2017
Every year, we draw from our members to build our top leadership team.
So, I am now pleased to introduce to you NASAA’s team for this new year. I wish to thank them all in advance for their service, time and commitment.
Please stand when I recognize you – and for the audience please hold your applause until I’ve introduced everyone.
2016-2017 Board Members:
Past-president – Judy Shaw from Maine,
President-elect – Joe Borg from Alabama;
Kevin Anselm from Alaska,
Shonita Bossier from Kentucky,
Tom Cotter from Alberta,
Pam Epting from Florida,
Melanie Senter Lubin from Maryland,
Mike Pieciak from Vermont.
2016-17 Section Chairs
And I will be naming the following members as section chairs:
Broker-Dealer Section – Andrew Hartnett from Missouri,
Corporation Finance Section – Bill Beatty from Washington,
Enforcement Section – Laura Posner from New Jersey,
Investment Adviser Section – Andrea Seidt from Ohio,
Investor Education Section – Karen Tyler from North Dakota
As you can see, our board and section chairs include a wide variety of talent and strong experience.
I am very excited to be working with all of you.
So now, please join me in giving them a round of applause!
PRIORITIES FOR THIS YEAR
As NASAA president for the coming year, I will build on our strengths and accomplishments.
We will focus on making NASAA an even better organization … stronger in our service to our state and provincial members … and, above all, stronger in supporting our responsibilities to protect the investing public.
Now, let me share my vision for this year, with just a few of NASAA’s top priorities.
First, cyberattacks have become one of the greatest threats globally to our financial sector. All of us need to enhance our cybersecurity readiness.
Cybersecurity will be a growing challenge for the securities industry and for securities regulators at all levels – federal, state and provincial.
No securities firm or professional of any size can afford the loss in client trust – much less financial losses – that will result from a serious cybersecurity failure.
And no investor should have his or her personal information compromised.
It is imperative that everyone in the securities industry take the necessary steps to get cybersecurity ready to prevent, mitigate and respond to cyberattacks. It is everyone’s responsibility – from the boardroom and top executives to rank-and-file employees and solo investment adviser firms.
And, these threats to the public interest mean that, as regulators, we must be vigilant as well.
We need to closely monitor developments to promote best practices in the industry. It is important that securities firms and professionals have the tools and information they need for cybersecurity. It is also essential to have the proper regulatory expectations and guidance in place for the securities industry.
Two years ago, NASAA conducted a survey of small and mid-sized registered investment adviser firms in nine states. NASAA has worked with its members to develop resources for firms, and we established cybersecurity committees to strengthen our efforts. We also have enhanced our collaboration with other federal and state regulators.
It is now time for us to take another, closer look at the current state of preparedness and at what kind of support NASAA can provide.
To this end, we plan to consolidate our efforts with a joint committee composed of our Board-level Cybersecurity Committee and our Investment Adviser Cybersecurity and Technology Committee. This leadership team will look at new ways to provide resources for regulators and industry members to address cybersecurity issues.
We will work as collaboratively as we can so that we are all better prepared against cyberattacks.
Next, as always, one of our primary regulatory functions is to continually enhance vigorous enforcement to protect investors from bad actors who commit fraud and abuse.
Investors trust that “someone” is keeping watch to make sure that the businesses and individuals who manage their money are doing so responsibly.
We are that “someone” – “the local cops on the securities beat,” as we’ve been called. My own motto is simple: “Not on my watch.”
It’s hard to overestimate the importance of this enforcement role – because what’s at stake is often people’s life savings.
Let me tell you about a Minnesota man named Sean Meadows, who used his financial planning and asset management firm to operate a long-term Ponzi scheme – stealing more than $13 million from at least 100 individual victims.
Meadows lured his victims into removing funds from their retirement and other financial accounts by promising high rates of return in investment products when, in fact, he did not invest their funds at all.
Instead, he used money from new investors to make interest or principal repayments to existing investors. Most of all, he used the stolen money to bankroll his own extravagant lifestyle – including high-stakes gambling and spending more than $135,000 at adult entertainment establishments.
Instantly his victims were left in financial ruin – losing their retirement funds and homes, their ability to support their families and (in one case) even the ability to pay for cancer treatments.
Working with federal authorities, my agency helped bring Sean Meadows to justice. He is now serving a 25-year prison sentence.
Meadows was sophisticated, and crooks like him keep coming up with new schemes to steal people’s money.
That’s why one of my priorities will be to launch new ways in which NASAA can help us get ahead of the enforcement curve as much as possible.
As regulators, we need to be just as creative, just as innovative, as the crooks we’re going after.
Accordingly, I plan to focus on enhancing resources, data and analytics opportunities within NASAA, and working collaboratively across our jurisdictions to find ways to better share information and stay on top of the latest fraud and criminal activity.
To do this, we will build on our multi-jurisdictional efforts, and increase our collaboration and coordination with our federal partners, as well as with law enforcement agencies and criminal prosecutors.
Senior Financial Protection and Security
NASAA also has long been focused on protecting seniors and vulnerable adults from financial exploitation.
It can happen to anyone. And it will be a growing responsibility as seniors retire at a pace of about 10,000 per day.
NASAA stepped up its efforts this past year. The list of accomplishments is significant including approving the NASAA Model Act to Protect Vulnerable Adults from Financial Exploitation. Several states have already enacted similar laws and many others (including my state) are working to enact it.
And at the federal level, thanks in part to NASAA’s advocacy, the Senior$afe Act is nearing full passage through the United States Congress.
NASAA also launched its Serve Our Seniors initiative to provide resources for senior investors, family caregivers, the securities industry, and policymakers.
And many of you are taking advantage of the Senior$afe training program for broker-dealers and investment advisers to help them see and report financial exploitation.
I believe there is even more that can – and must – be done to protect our seniors against fraud and financial exploitation.
Financial service providers and professionals are uniquely positioned to help identify financial abuse on the front lines. Because of their long-standing relationships of trust with older clients, they are able to serve as a first line of defense to spot and stop financial crimes.
Unfortunately, I see the victimization of the elderly way too frequently and it must stop. As state and provincial regulators, we are uniquely position to tackle this issue, and we will use new and innovative tools to help our seniors.
For example, earlier this year, our Commerce Fraud Bureau received a call from a financial adviser seeking advice about a senior client who was trying to cash out a pre-tax annuity worth $250,000. The client said she needed the money to pay the taxes and fees associated with “winning” a lottery in Costa Rica.
The financial adviser recognized that her client was being defrauded and asked our Fraud Bureau for assistance. The financial advisor felt there was no legal basis to halt the client’s transaction. We, however, learned that the proceeds were being sent to the client’s bank account prior to being transferred to Costa Rica. We contacted the bank, which froze the client’s account so it would not be a party to the fraud.
A few weeks later, the client called us. She now agreed that she had been the victim of fraud and thanked us for getting the bank to stop the transfer of her $250,000 to Costa Rica.
This case and many others like it demonstrate that senior financial exploitation is a real threat that requires an “all hands on deck” response from all of us in a position to prevent and stop these crimes.
To stop financial crimes against seniors, I would like to see us work more closely with law enforcement agencies and prosecutors.
We also need to be working with other stakeholder groups like AARP and the Better Business Bureau, as well as with professional associations whose members serve seniors.
I am proud that NASAA is a leader in protecting seniors, and I look forward to strengthening our leadership.
Investor education is another key area where collaboration is vital – and it builds on another traditional strength of the NASAA organization.
I am a strong believer in the value of financial capability and empowerment. From kindergarten to retirement, people should have the tools they need for financial opportunity and protection to help manage their money.
In my first year as Commerce Commissioner, I convened Minnesota’s first Financial Literacy Roundtable – bringing together stakeholders from nonprofits, business, education, faith groups and government.
It is now an annual tradition every April – “Financial Capability Month” – when we help coordinate events and activities throughout the state with a wide range of partners.
Financial capability is about educating and empowering all people of every age to take charge of their financial futures. Not only does it help people step up the ladder of economic opportunity and wealth, but also it helps to protect against predatory financial tricks and traps.
We need to continue and do more outreach and education to stop senior financial exploitation, to teach our kids in schools about financial capability, and to help empower diverse communities.
It’s never too early nor too late to start the conversation.
For example: I meet with kids and read the book “Alexander, Who Used to be Rich on Sunday,“ by Judith Viorst. The book helps children understand the importance of managing their money wisely. We talk about share, save, spend. With older kids I emphasize investing and the time value of money.
I was even once upstaged at our Financial Capability Roundtable, by a magical moment when a class of 25 cute first graders sang “Pennies, Nickels, Dimes, and Quarters” – a song that teaches children how to count money.
Because of its importance, NASAA and its members will continue to build collaborative partnerships at the local, provincial, state and national levels in support of investor education and financial capability.
NASAA also plays an important role in coordinating state efforts to promote responsible small business capital formation and investment opportunities.
In each of the past two years, NASAA has sponsored a Capital Formation Roundtable – providing an opportunity for issuers, investors, regulators and stakeholders to have an open dialogue about regulations, policies and actions that affect the ability of small businesses to raise capital.
These roundtables offer a forum to address important topics. They have resulted in initiatives underway within NASAA to modernize our rules and regulations. I look forward to next year’s roundtable and the constructive discussions it will engender.
The issues I’ve just spoken about: cybersecurity, enforcement, protecting seniors, providing financial education and helping to facilitate responsible capital formation, in fact nearly all the issues we work on, all revolve around a key priority: Collaboration.
Again, this is not new. It builds on one of NASAA’s greatest strengths as an organization. But there is always more we can do.
As I mentioned earlier, I would like us to look at additional opportunities for multi-jurisdictional investigations, examinations and other initiatives.
This includes efforts that would engage our Canadian and Mexican members. Especially on the enforcement front, we know that bad actors do not respect state, provincial or national borders. We need to enhance our collaboration across borders.
We also need to continue to share information and efficiently leverage the resources of each state and province to obtain maximum impact.
I would like to see us deepen existing collaboration and coordination with federal partners and with FINRA.
On another front, NASAA has long-taken a strong stand on fiduciary responsibilities, and we will continue to monitor and work with everyone on the new Department of Labor fiduciary rules.
On the enforcement side, cooperation and coordination between state and federal securities regulators is essential to investor protection and to maintaining the integrity of our financial markets. A united front is a particularly effective regulatory and enforcement tool.
Enhanced Services to Members
Finally, but in many ways most important, our top priority is to further improve and work hard to deliver key services and resources to you our NASAA members.
As set out in our strategic plan, one of NASAA’s primary goals is to enhance our skills, knowledge, and abilities through education. Another is to assure an effective and efficient corporate governance and organizational structure.
For NASAA to be an even more successful organization to support you as effective state and provincial regulators, here are some of the key action-steps planned for this coming year. We will –
1. Increase training opportunities for you and agency staff;
2. Promote mentorship among all of us in NASAA’s membership;
3. Build regional collaboration with expanded zone relations;
4. Enhance our communications and public outreach; and
5. Strengthen NASAA’s governance, corporate office, and staff development and resources.
As leaders, we recognize it is important that NASAA strive for continuous improvement in order to be a high-performing organization that can adapt to changing needs and effectively serve our members.
NASAA has a very distinguished history – with a strong and proud record of helping you as members fulfill our responsibility to protect investors and ensure financial-market integrity.
But I dare to say that NASAA’s mission has never been more important than it is today. We are living in an ever-changing and ever-more-complex financial world. It is a world that constantly presents new challenges to investors – and also new challenges to us, as regulators.
Accordingly, we must continuously assess and adapt our own priorities to meet these new challenges. As your president, that is what I hope to do.
As I accept this new role, I am humbled by the great history of this organization. I am humbled by the legacy of the previous presidents in whose steps I now follow. Most of all, I am humbled by the trust you have placed in me – and I thank you for that trust.
We have a full, exciting agenda ahead of us for the coming year, and I look forward to working with all of you!