Regulation: Regulator tells Senate why regulatory reform is needed

Crawford says in the letter "We believe that the single most important protection that the Senate could provide for individual investors is requiring that stockbrokers giving investment advice act in their clients' best interest. Senators Bob Menendez and Dan Akaka have sponsored an amendment to replace the study in Sec. 913 with House-passed language that directs the SEC to conduct rulemaking to do just that. While state securities regulators would prefer a broader and less qualified provision, this amendment has garnered broad support and would be the first step in closing a significant regulatory gap and providing a much-needed protection to American investors."

She is anxious that holes in the existing regulatory regime are plugged: "For example, we are pleased that Section 410 of the proposed bill seeks to address the lack of regulatory [supervision ]of smaller investment advisers by shifting regulatory responsibility for these advisers from the SEC to the states. Allowing the SEC to focus on larger advisers is a better use of the agency's limited resources and underscores the proven track record of state securities regulators."

Reform, too, is needed to decide who is an "accredited investor," she says: "We strongly support the adoption of a disqualification provision to prevent recidivists from conducting securities offerings under Regulation D, Rule 506 (a regulatory exemption for private placements). This change would provide much needed investor protection from securities law violators and would not prevent legitimate issuers, including small businesses, who use this exemption, to raise capital. Participants in the Regulation D offerings are "accredited investors" as established under SEC rules. The monetary standards for determining who qualifies for "accredited investor" status haven't changed since it was established in 1982 and inflation has rendered them almost meaningless. Therefore, we support, at a minimum, excluding the investor's primary residence from the net worth standard."

And, like California's Attorney General Brown, Crawford says that the states must have supervisory and enforcement powers over financial institutions operating in their jurisdiction: "Financial Stability Oversight Council. (Sec. 111) It is essential to include state banking, insurance and securities regulators as members of the Council to formalise regulatory cooperation and communication among all federal and state regulators. This will result in more effective [supervision] of our intertwined financial markets by creating a body with access to all the critical information regarding the accumulation of risks in our financial system, and it draws upon the existing expertise and proficiency of each functional regulator."

And in her capacity as President of NASAA, Crawford has a huge amount of weight, if not (due to the presence of Lobbyists on the Hill) an equivalent amount of clout. NASAA is the oldest international organization devoted to investor protection. It was organised in 1919. Its membership consists of the securities administrators in the 50 states, the District of Columbia, the U.S. Virgin Islands, Canada, Mexico and Puerto Rico.