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Closing Remarks at North American Securities Administrators Association Section 19(d) Conference

Commissioner Kara M. Stein

Washington D.C.

May 9, 2017

It is always a pleasure to participate in the annual Section 19(d) conference.  Since last year’s conference, NASAA and the SEC have deepened our mutual cooperation on matters affecting our markets and investors.  The Memorandum of Understanding and Information Sharing Agreement between the SEC and NASAA, which was signed in February is one example of the coordination we have accomplished since last year.  This forum provides yet another opportunity for us to share ideas and to think broadly about how best to support our mutual goals of protecting investors and the integrity of our markets.

Before I dive into the substance of my remarks, I would like to thank each of you.  You show your commitment each and every day by helping protect investors throughout our nation while supporting the entrepreneurs and small businesses that are the engines of economic growth.  This is important work.  And work on which we should continue to coordinate.

Let me also pause to state the standard disclaimer that I am speaking today as an individual Commissioner and not on behalf of my fellow Commissioners or the Commission staff.

This morning, we have focused on fintech, JOBS Act implementation, enforcement trends, cybersecurity, and seniors.  While various topics were addressed, there are three overarching themes, which I hope we will continue to discuss in the year ahead.

They are:

  1. the importance of change and adaptation;
  2. the importance of communication and coordination; and,
  3. the importance of data-driven analysis.

As regulators, to be effective and to understand the changes occurring in the markets, we must be current.  We must be adaptive.  And we must evolve. The discussions on emerging trends in fintech, robo-advice, and cybersecurity highlight how critical adaptation is to our regulatory roles.  Cybersecurity, in particular, is challenging us to develop entirely new vocabularies and skill sets.  The growing number, frequency, and impact of cyber threats have propelled cybersecurity into one of the most important issues facing our markets.  These are risks we need to understand in order to better protect investors and the integrity of our markets.  We will need to adapt and make technology a bigger part of our mission.  Similarly, I hope we continue to examine the range of possible uses of blockchain technology, while remaining mindful of vulnerabilities associated with potential cybersecurity risks and investor protection.  In short, we will need to creatively address how 20th century rules and principles can best fit within the new paradigms of the 21st century.

The second theme from today’s discussion focuses on the importance of communication and coordination.  We often witness the devastation suffered by victims of securities fraud.  Whether fraudsters cold-called their victims to peddle their fraudulent “investment opportunities”, or sat beside them in church, the results were the same.  How does the information shared between NASAA and the SEC on fraud in the private markets inform policy going forward and our ability to better protect investors?  How does this inform our enforcement policy priorities?  The coordinated efforts of NASAA and the SEC toward such information sharing will help us all do a better job.

Finally, I was pleased to see that underpinning all of today’s discussions is the recognition of our need for high-quality data and data analytics.  I encourage you to continue to think broadly and creatively about how you identify the data to be collected and how you analyze this information.  Notwithstanding legislative initiatives that are afoot, it may be useful to first gain an understanding of what is working and what truly needs fixing.  Data we are collecting at the state and federal level on JOBS Act capital-raising provisions will help inform our view.  The Commission staff, with the assistance of state regulators, have undertaken to study and submit a look-back report on Regulation A+, Regulation CF and the exemptions to facilitate intrastate and regional offerings.[1]  These reports may provide insight into not only the quantity of capital raised under the respective provisions, but equally importantly the quality of our markets.  Specifically, they will analyze intermediaries’ role in facilitating transactions and the level of investor protection.  We may also gain insight into how issuers are navigating from one JOBS-Act offering exemption to another and the possible effect this may be having on their ability or perceived need to graduate from the private to the public markets.

In closing, I re-iterate my strong support for continued coordination and cooperation between NASAA and the SEC and look forward to our work together and year ahead. Together, we can work on changing and adapting our approaches to address new products and a constantly evolving marketplace.

Thank you.


[1] See e.g., Securities Act Release No. 33-9741, 80 FR 21805 (Mar. 25, 2015); Securities Act Release No. 33-9974, 80 FR 71387 (Oct. 30, 2015); and Securities Act Release No. 33-10238, 81 FR 83494 (Oct. 26, 2016).