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Stay updated with NASAA's policies, expungements, IAR-CE, state rules, and legislation at the educational conference. Get insights from financial administrators and regulators on regulatory priorities and industry developments.
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NASAA Panel: State Issues ARM 2019 Educational Conference Amelia Island, FloridaMarch 5, 2019
Today’s Agenda • NASAA Policies and Priorities Update • Expungements • IAR-CE • CRD/IARD Update • State Rules and Legislation • Enforcement Statistics
Panel Natasha Hurt Financial Administrator, Division of Securities Florida Office of Financial Regulation Chris Staley Assistant General Counsel, NASAA Melanie Lubin Securities Commissioner, Maryland Division of Securities Rodney Griess Securities Investigation and Compliance Unit Supervisor, Nebraska Department of Banking and Finance
Policy Priorities • Coordinated state responses to financial threats and investor protection. • Modernization of state and corporate systems to promote uniformity and effective resource allocation. • Strengthening relationships between regulators and state/federal decision makers. • The 2019 NASAA Legislative agenda is available on our website March 5, 2019.
Expungement Update *Note – please contact NASAA for additional information on the statistics contained in this presentation.
Rule 2080-Related Litigation *Note: some prior waiver requests where FINRA has been named as a nominal party have been included in these figures
Why IAR-CE? • Unlike most financial services professionals, IARs are not independently required to meet a continuing education requirement to maintain their licenses • 2017 survey of NASAA U.S. members indicated strong support for closing this gap and exploring a CE program for IARs • Could improve the overall quality of IA advice & professionalism enjoyed by investors • IAR CE could foster heightened regulatory compliance & reduce the number of compliance deficiencies state securities regulators continue to see in their regulatory examinations every year
Survey • NASAA engaged Prometric, a leader in test development and the CE industry, to assist NASAA in the potential development of an IAR-CE Program • Working with Prometric & drawing from past exams (NASAA Series 63/65/66) surveys, NASAA developed an online survey to elicit views on a number of topics related to a potential IAR-CE program, including: • Content areas for CE & delivery methods • Program structure and requirements • Current CE obligations and participation
IAR-CE Survey Timeline • Stakeholder Engagement –February 2018 • Survey Opened in February and Closed in April, 2018 • Compiled and Analyzed Results – 2Q 2018 • Committee Discussion/Review & Recommendations to Board – 3Q 2018 • Stakeholder Re-Engagement – 4Q 2018 • Next Steps/Implementation – Ongoing with potential implementation slated for 2021
IAR-CE Survey Timeline • Survey was conducted between February and April 2018 • The results were analyzed in May and June 2018 and a complete report was presented to the NASAA Board in July 2018 • After reviewing the report, the Board accepted the Committee’s recommendation and instructed the Committee to begin exploring next steps
IAR-CE Survey Results: Who Replied • The survey generated useable data from approximately 1,200 respondents. • ~ 1,000 respondents indicated they were registered as an IAR • ~ 100 respondents were staff of state securities regulators; and • ~ 100 respondents indicated they were either compliance consultants or compliance officers (though not registered as IARs).
IAR-CE Survey Results: Current CE Requirements • 56% of respondents are already subject to CE • The majority indicated CE requirement was due to a CFP designation and/or FINRA registration • 61% of respondents are already subject to CE if state regulator responses are excluded
IAR-CE Survey Results: Does Industry Think IAR-CE is Important and Needed • 75% indicated IAR-CE was at least somewhat important • 50% said it was important or very important. • Almost 70% said IAR-CE was at least somewhat needed in their jurisdiction • Nearly 40% said it was needed or critically needed
IAR-CE Survey Results: Does Industry Support an IAR-CE Program • 72% said that they would at least somewhat support the creation of an IAR-CE program • 35% indicated they would support or strongly support IAR-CE
Update: Legislation & Rules* • Louisiana – extended the date for IA reps to submit fingerprints to the Securities Division to January 1, 2020. • Pending amendments to the Commissioner’s general powers under 6:121.2. Changes to the standard of the Commissioner’s general powers are expected during the 2019 legislative session. *Disclaimer – please note that some of this legislation has been proposed or introduced, but is not FINAL; further, please confirm with the applicable state regulator for confirmation prior to reliance on any legislation or rule change discussed here today.
Update: Legislation & Rules* • North Dakota – proposed eliminating the prohibition on refunding industry registration fees under NDCC 10-04-10(8). The bill would also eliminate the prohibition on refunding certain notice filing fees and updates the manual exemption to include OTCQX and OTCQB. • Has passed the Senate, will be heard by the House Q1 2019. • Proposed registration by coordination alternative under the ND Securities Act. • Has passed the Senate. *Disclaimer – please note that some of this legislation has been proposed or introduced, but is not FINAL; further, please confirm with the applicable state regulator for confirmation prior to reliance on any legislation or rule change discussed here today.
Update: Legislation & Rules* • Ohio – enacted New Mandatory Reporters for Elder Abuse effective 9/29/18. • Investment Advisers and Financial Planners accredited by a national accreditation agency are now mandatory reporters of known or suspected elder abuse. • Persons subject to this law are required to make a report, oral or in writing, to the Ohio County Departments of Job and Family Services when they have reasonable cause to believe an adult is being abused, neglected, or exploited. • The law provides civil and criminal immunity for the reporter unless the person has acted in bad faith or with malicious purpose. • Signed into law further amendments to RC 5101.63 expanding the list of mandatory reporter to include dealers, salespersons, and investment adviser representatives as defined under the Ohio Securities Act. The effective date of this amendment has not been published. *Disclaimer – please note that some of this legislation has been proposed or introduced, but is not FINAL; further, please confirm with the applicable state regulator for confirmation prior to reliance on any legislation or rule change discussed here today.
Update: Legislation & Rules* • Michigan – rescinded and replaced administrative rules and transition orders enacted from 2009-2019. • Rules covering broker-dealers, agents, investment advisers, investment adviser representatives, securities products and other topics that fall within the scope of the act. • The overwhelming majority of adopted rules are based on NASAA model rules with some state-specific modifications. • Most rules will become effective on July 3, 2019; Private Fund Adviser Exemption will become effective on January 3, 2020. • Further information on the new Michigan Securities Rules available on the Michigan Department of Licensing and Regulatory Affairs website. *Disclaimer – please note that some of this legislation has been proposed or introduced, but is not FINAL; further, please confirm with the applicable state regulator for confirmation prior to reliance on any legislation or rule change discussed here today.
Portal Statistics • 1500+ firms. • 23,000+ individuals verified through system annually. • Within first business day, 25% of all monthly rosters completed. • Within 30 days, 90% rosters complete. • Within 60 days, 95-97% complete. • Still chasing down that 3 to 5%. (Decreased, but still present.) • Manual review now to just QLA and exempt, 5% of all remittances. • Firms now have “real time” knowledge of all outstanding employees to be worked.
Current Pain Points: Department Remittance of ALL verification documents; i.e., Sevis numbers in addition to I-94’s when applicable. Front and back side copies of relevant documents. Clear/legible scans/copies of documents remitted. Firms Ability to download Rosters (csv. Etc.) for firms’ to work and then plug back into the portal. (Work in process.)
NASAA 2018 Enforcement Report • NASAA’s 2018 Enforcement Report (re: 2017 activities) reflected that NASAA Members: • Conducted 4,790 investigations • Took 2,105 enforcement actions, which resulted in -- • More than $486 million in restitution ordered returned to investors, and • 1,985 years of incarceration, probation, and deferred prosecution • Sanctioned 4,500 licensed securities individuals or firms (i.e., licenses withdrawn, denied, revoked, suspended or conditioned)
NASAA 2018 Enforcement Report • Protection of Seniors Remains a Priority for NASAA Members • In states that have adopted the NASAA Model Act (or similar statutes), NASAA Members have received more than 500 reports of potential senior financial abuse • NASAA Members brought formal enforcement actions in 2017 related to over 1,100 elderly victims • Past and present reports and statistics available here.
