Speech by Commissioner Luis A. Aguilar: Advocating for Greater Federal and State Securities Regulatory Cooperation and Collaboration
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Before I begin, let me start by issuing the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the
I am pleased to be here again, at the
Much of your diligence and hard work is unsung and unheralded. The frauds you have prevented and the investors you have protected are triumphs that should be celebrated. There is no truer testament to your hard work. I applaud you.
The difficult work that you do on a daily basis in the face of inadequate resources, ancient technology, and outsized opponents is honorable. Regulator bashing is current sport in DC. While I don't mind critics who keep the
My time with you today is limited and I want to keep my remarks focused. I think it is important that regulators come together to combine forces and pursue our common goals. I want to talk to you about a few opportunities I see on the horizon.
Greater Opportunities for
When I first spoke to NASAA in
I want to start with an example where the
As we all know, Dodd-Frank changed registration thresholds in the investment adviser arena in a significant way. Some private fund advisers who had not before been required to register with the
To give just a flavor of the effort undertaken here, I know the Commission has received approximately 20,000 Form ADV filings, which were all processed by the IARD. I know the staff has spent extraordinary effort reviewing registration applications, responding to thousands of phone calls and emails, as well as developing and publishing guidance - while prioritizing all the while the
Of course, there is no rest for the weary. Still ahead is the transition to state registration of a little over approximately 2,100 mid-sized advisers. We anticipate that the total number of investment advisers registered with the Commission will decrease by at least this amount once this transition is complete - and, of course, the responsibility for these mid-sized advisers will shift to the states.
I want to spotlight the
A new opportunity to work together has arisen from the recently passed Jumpstart Our Business Startups (JOBS) Act.5 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P28_6596) I am referring to the explicit Congressional mandate that the states be consulted on the crowdfunding provisions that are contained in the bill. Specifically, the statute requires that the Commission consult with the state securities regulators on the rules that are required to implement the crowdfunding provisions of the JOBS Act.6 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P29_7024)
This is an opportunity for the Commission to engage with the states and set up a process to make sure that the rulemaking benefits from the input of everyone involved. My expectation is that the
It is important that this mandated cooperation and collaboration is not undercut or subsumed by the deadline contained in the statute.7(http://www.sec.gov/news/speech/2012/spch050712laa.htm#P33_7536) In connection with all of the statutory mandates of the Dodd-Frank Act, you often hear that more important than the deadlines ... is the need to get it right. That is just as applicable here, if not more so.
Financial Exploitation of the Elderly
I am 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 million seniors - has been victimized by financial fraud.8 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P36_8403) It is the responsibility of regulators to represent the vulnerable by writing and enforcing rules that reduce the opportunity for fraud.
Demographically, seniors will soon be the largest percentage of the American population. Experts have been forecasting this for some time, as the baby boomer generation ages and retires. What has not been emphasized, as clearly, is the tremendous generational inequality of wealth between some seniors and everyone else. The good news is that in the aggregate, today's senior population has been successful in accumulating assets. As noted by
Unfortunately, at a time when vulnerabilities are being exacerbated, the law enforcement and government framework to handle elderly exploitation has been severely cut back. Thus, at a time when the need grows greater, there are far fewer resources devoted to the problem. As the General Accounting Office has explained, "[s]tates are primarily responsible for protecting older adults from abuse, neglect and exploitation."10 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P40_10298) Sadly, state resources have been decimated. In 2011, as the economic downturn continued to wreak havoc on government budgets, 181,000 local workers and 63,000 of their state peers were let go.11 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P41_10716) In the aggregate, state and local workers have seen their numbers dwindle throughout the Great Recession. Some 656,000 employees have been laid off since mid-2008.12 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P42_11034)
Given this landscape of a vulnerable population growing larger and more susceptible to exploitation, and the fewer resources devoted to enforcing the law and punishing those who commit fraud - one can see the serious opportunity for financial exploitation of older Americans. We know there will be no shortage of those who will seek to do exactly that. It is almost as if our seniors are wearing targets on their backs.
There will always be those who want to prey on the vulnerable and seek to exploit them. That is why we must have a strong securities law framework in place that limits the opportunities for fraud and deception, and a well-funded enforcement arm to enforce the law against those who attempt to break it.
Unfortunately, we are now facing a world where the elderly are growing more vulnerable, and their protectors find themselves undercut and underfunded. As result, there needs to be a different public dialogue than the one that is now occurring. Currently, there is an acknowledgement that there is a retirement crisis on the horizon; but the vulnerabilities and harm to the elderly investor, and the lack of a clear safety net, have not been acknowledged enough. It is time to take action to cope with this problem. My chief of staff,
All of the topics I have discussed today are important initiatives where the public will be better served by greater collaboration and cooperation between federal and state regulators.
The last topic is one that is near and dear to my heart - and that is the
Just as this committee was beginning to do real work, it was wound down in anticipation of the imminent establishment of a new
I am happy to report that, on
The Dodd-Frank Act was quite specific that there must be at least one representative of state securities commissions on the IAC.16 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P55_15059) I am thrilled that
These are challenging times where investor protection feels like an uphill battle. 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. Now, more than ever, the American public needs its regulators to be vigilant and pro-active.
I have highlighted a few issues where I see federal and state regulatory cooperation and collaboration as critical to the success of the underlying policy. It behooves us to seize these opportunities and I look forward to working with you to do just that.
I have to conclude where I began. I have to thank you for the work you do in the public interest every day. It is this work that inspires me and it is this work that I wish to support.
Thank you for having me here and have a wonderful conference.
2 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P19_3591) See National Securities Markets Improvement Act of 1996, Pub. L. No. 104-290, 110
3 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P20_4019) Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124
4 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P22_4590) See section 403 of the Dodd-Frank Act (eliminating the old private adviser exemption from section 203(b)(3) of the Investment Advisers Act of 1940 (the "Advisers Act")).
5 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P28_6597) Jumpstart Our Business Startups Act, Pub. L. No. 112-106 (2012) (the "Jumpstart Act").
6 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P29_7025) See section 302(c) of the Jumpstart Act.
7 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P33_7537) Section 302(c) of the Jumpstart Act provides for the
10 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P40_10299) Testimony before the
12 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P42_11035) Id., citing
13 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P49_13147) Securities and Exchange Commission Release No. 33-9037, File 265-25 (
15 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P53_14468) SEC Announces Members of
16 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P55_15060) See section 39(b)(1)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), which was added by section 911 of the Dodd-Frank Act.
17 (http://www.sec.gov/news/speech/2012/spch050712laa.htm#P56_15526) Securities Exchange Act of 1934, sections 39(b)(1)(C) and 39(b)(1)(D)(i).
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