NASAA President names erasure and digital assets as long-term priorities
In her first speech as 104th President of the North American Securities Administrators Association, Maryland Securities Commissioner Melanie Senter Lubin said the process of delisting advisors and brokers would be one of the group’s top priorities. and that the association’s involvement in shaping digital asset policies “was likely to increase.”
Lubin succeeded West Virginia Assistant Securities Commissioner Lisa Hopkins as president of the association, which represents state securities regulators. During her speech, held on the last day of the NASAA Annual Meeting in Chicago, Lubin said she was proud that two women are consecutively NASAA Presidents for the first time, and praised Hopkins for her leadership in this. which she described as “very difficult”. year.
Melanie Senter Lubin
Lubin said that delisting – or removing customer disputes from a broker’s record – should be an “extraordinary” event and only be granted in special cases. Lubin was concerned that the current system of “arbitrator-assigned” write-offs might not always match the hurdle that would need to be in place to merit the clean-up of records, and said she intended to work with both. the Securities and Exchange Commission and the Financial Industry Regulatory Regulatory. The authority changes to ensure that delisting has only been granted “in appropriate circumstances”.
“Tightening standards and procedures around write-offs are essential to end the continuing threat to the integrity of record keeping and critical information needed by regulators making licensing decisions, by businesses. who make hiring decisions and investors who decide who to trust for their financial well-being, ”she said. .
In a recent analysis, the Public Investors Advocate Bar Association found that FINRA had granted write-offs in nine out of 10 cases, and in May, the regulator has temporarily withdrawn a rule deposit review by the SEC that allegedly changed several parts of its delisting process. The proposed changes required special training for arbitrators and required that all claims be decided by a three-member panel of “randomly selected” arbitrators. According to a statement, FINRA withdrew the file to determine “whether changes to the file” would be necessary.
Lubin said NASAA will work with Congress and the SEC on other priorities, stressing the protection of senior investors, citing the recent passage of a bill in the House of Representatives establishing an SEC task force to work. with state regulators on senior investor protection initiatives. Earlier in the conference, the association has published a notice of over 1,200 state investment advisor reviews indicating that over 58% of advisers did not have policies or procedures in place to protect the elderly and vulnerable from financial abuse.
Additionally, Lubin said NASAA will increasingly focus on cryptocurrencies and digital assets, noting that state regulators have used their authority to end scams and restrict unregistered activity. Lubin stressed that her position was not that digital asset platforms were “inherently bad”, but she was concerned that they would encourage and even manipulate investors into harmful and speculative business practices.
“The fact that these innovations open up capital markets to individuals or groups who might not otherwise have access could be a good thing, but the magnitude of the benefits made through arrangements such as payment orders and investors’ lack of understanding of the risk all raise concerns that the practice invites fraud and other misconduct, ”she said. “Innovation is good, but the rules still apply. “
Cryptocurrencies and digital assets have been at the center of enforcement action by state securities regulators over the past year, according to presentation providing an overview of NASAA’s upcoming annual enforcement report . According to Joe Rotunda, chief enforcement officer of the Texas State Securities Board and vice president of the NASAA enforcement section, regulators reported a total of 125 investigations in 2020, up from 67 the previous year, and conducted 52 enforcement actions compared to 16 the previous year. .
In actions related to social media and internet offerings, there were 214 investigations and 84 enforcement actions in the most recent analysis, up from 141 and 64 the previous year, respectively. Rotunda called cryptocurrencies and digital asset patterns one of the main threats to investors, along with real estate investment patterns and promissory note patterns.
While COVID-19 has had an impact on how regulators have enforced these and other programs in the courts, Rotunda said regulators have found ways to do it and even halted some programs early in their life. life cycle.
“We get these reports of alleged exploitation, and that means we see reports of potential exploitation before the programs collapse, before they attract significant numbers of victims and collapse. under their own weight, ”he said. “This allows regulators and state authorities to take proactive steps to protect the public, instead of trying to clean up the mess after a financial regime collapsed and left a number of victims without their funds. of retirement.”