RIA Compliance Blog
Commissioner Luis A. Aguilar of the Securities and Exchange Commission (SEC) spoke at the recent NASAA/SEC Rule 19(d) Conference in Washington D.C. He addressed the importance of cooperation and collaboration between federal and state securities regulatory agencies in order to improve investor protection. Commissioner Aguilar also expressed a desire to have a continuing collaborative relationship between the SEC and the North American Securities Administrators Association (NASAA). “I continue to be interested in exploring more opportunities and avenues for the SEC and NASAA to partner and leverage our collective resources to protect investors,” Commissioner Aguilar said, “At a time when regulators are under greater constraints than ever, it makes sense for us to come closer together to further our common goals.”
Commissioner Aguilar discussed four areas in which the SEC and NASAA have worked together to improve investor protection. These areas include the transition of advisers to state regulation, crowdfunding, financial exploitation of the elderly and the creation of the Investor Advisory Committee.
As a result of the Dodd-Frank Act, the SEC adopted a rule requiring advisers with $25 million to $100 million in assets under management to transition to state regulation from SEC regulation. Commissioner Aguilar acknowledged the hard work by both agencies to accomplish this transition stating, “The smooth transition related to new registrants and changes in registration thresholds for investment advisers can only be possible because of the tremendous work done, and continuing to take place, of the SEC and NASAA staffs.” We have previously discussed the transition to state supervision in numerous blogs including: Fewer Firms Make the Switch to State Oversight Than Expected, Mid-Sized Advisers Should Have Already Commenced Transition and Dodd-Frank Registration Requirement Driven By State Law Distinctions. The SEC received approximately 20,000 Form ADV Filings by March 20. Approximately 2,100 of them were mid-sized advisers that need to transition to state registration.
The recently passed Jumpstart Our Business Startups Act created a new provision which will allow investors to use crowdfunding to raise capital. Commissioner Aguilar discussed the importance of the SEC receiving input from state regulatory agencies and NASAA before it creates rules relating to crowdfunding. “My expectation is that the SEC staff will design a process that incorporates NASAA from the beginning and that the process will produce a truly collaborative product,” Commissioner Aguilar said.
Commissioner Aguilar is also “interested in partnering with NASAA to develop ways that we can combat the increasing financial exploitation of the elderly. It has been estimated that at least one in five Americans over the age of 65 – that’s 7.3 millions seniors – has been victimized by financial fraud.” Commissioner Aguilar’s chief of staff, Smeeta Ramarathnam, has met with NASAA leadership to discuss how to work together to create a solution for this problem. The baby boomer generation is aging and retiring, which will soon make seniors the largest percentage of the American population. Because seniors have been able to generate a great number of assets for retirement, they are more vulnerable to fraud during the current recession.
The last topic that Commissioner Aguilar discussed was the Investor Advisory Committee established in 2009 by the SEC to help the agency better listen to investors. The 21-member committee is responsible for advising the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, initiatives to protect investor interests and to promote investors confidence. The Dodd-Frank Act mandated that this committee consist of at least one representative of a state securities commission, one representative of the interests of senior citizens and one represents individual equity and debt investors.
In conclusion, Commissioner Aguilar discussed the importance of investor protection and how it is a constant “uphill battle.” He stated, “In order to win the war, federal and state regulators must work together to pool resources and ideas to serve the public to our fullest ability.”
Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.