By Michael Pieciak
March 19, 2019 at 5:00 am ET
With a new Congress comes new priorities and new opportunities for collaboration to protect investors and strengthen our capital markets. But where to start?
The North American Securities Administrators Association has developed a legislative agenda for the 116th Congress that advocates for bipartisan policymaking that puts the interests of Main Street investors first.
NASAA members are state securities regulators who, for more than 100 years, have served on the front lines of investor protection, safeguarding the financial futures of hardworking Americans and assisting local businesses and entrepreneurs seeking to raise investment capital. Our message today remains as simple and as powerful as it was 100 years ago — when the interests of Main Street investors are put first, our capital markets, our economy and our country all succeed.
Our unique position as the closest regulators to the public provides a window into the concerns of Main Street investors and small businesses. That is why my colleagues and I went to Capitol Hill this month to share these and other insights with lawmakers and their staff. We offered recommendations on concrete steps Congress can take to protect and empower investors.
First, Congress must place the interests of the investing public front and center by strengthening investor protection and participation in the U.S. capital markets.
One way to accomplish this is by supporting enhanced standards of conduct for broker-dealers. When investors seek financial advice, they deserve to know that they are working with a financial professional who is acting in their best interest. Congress must continue to actively oversee the Securities and Exchange Commission’s Regulation Best Interest rulemaking process to ensure that the standard of conduct is strengthened and implemented quickly and fully.
Second, Congress must promote the integrity of capital markets by ensuring regulators at the state and federal level have the resources and tools they need to prevent and deter fraud and other forms of misconduct. Strong and independent state and federal securities regulators are critical for investors to trust capital markets. Congress must not infringe on the ability of state regulators to stop and punish bad actors operating in our own backyards.
Third, Congress should re-examine recently enacted laws and rules designed to expand private markets to ensure that Main Street investors have not been left behind. Specifically, Congress should hold hearings to examine the impact of the JOBS Act and other laws that have expanded private markets, perhaps to the detriment of the public markets, with an eye toward promoting a responsible and cohesive framework that serves investors and issuers. We look forward to engaging with Congress on proposals to help small businesses back home raise capital and create jobs.
Fourth, Congress must reaffirm the rights of investors in the modern securities marketplace and ensure our securities laws effectively protect these rights. Investor confidence in fair and equitable recourse is critical to the success of the securities markets. To that end, we urge Congress to ban the use of mandatory arbitration clauses in client contracts and work to ensure these contracts do not proliferate.
Congress also should take steps toward making harmed investors whole by reducing unpaid awards resulting from disputes between investors and securities firms. Financial Industry Regulatory Authority data indicates that in recent years, more than one in four of all arbitration awards go unpaid. We applaud FINRA’s recent work and progress in this area, yet more must be done.
NASAA has taken steps to raise attention to this issue and recently conducted a survey of investors who indicated they would support congressional action to address the problems associated with arbitration. For example, when it comes to resolving disputes with stockbrokers or investment advisers, 83 percent of respondents agreed that they would want a choice to pursue their dispute in court or in arbitration rather than being forced to sign a mandatory arbitration clause, and 58 percent said they would support Congressional action to reduce or eliminate unpaid arbitration awards.
Our complete agenda includes a wide array of policy recommendations, including those focused on financial technology innovations and related privacy and cybersecurity protections; intergenerational issues affecting millennial and senior investors; promoting shareholder rights; and strengthening the SEC’s power in federal courts to force wrongdoers to repay ill-gotten gains.
My colleagues and I look forward to engaging with members on both sides of the aisle to continue our advocacy to protect Main Street investors and ensure our capital markets remain the world’s most secure, transparent and successful.
Michael S. Pieciak is president of the North American Securities Administrators Association and commissioner of the Vermont Department of Financial Regulation.
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