The incoming president of the North American Securities Administrators Association, Denise Voigt Crawford, defended role of state and provincial securities regulators in a speech to the NASAA’s annual conference on Tuesday.

Crawford, who is also Texas Securities Commissioner, noted that the global financial crisis has given the world a new appreciation of the importance of sound financial regulation. “Virtually all developed countries are reforming their financial regulation, which failed to identify, much less rein in, unlimited risk-taking, industry practices based upon flawed economic models, and the inability or unwillingness of national governments to address these matters,” she said.

“While this catastrophe was the result of many failures, I am very proud to say that a failure of state securities regulation was not one of them. In the last few years, it has been state and provincial securities regulators who have been at the forefront of investor protection. Our record demonstrates clearly that we have the will and ability to regulate,” she added.

Crawford said NASAA will continue to defend the role of local regulators amid a push for centralization in both the U.S. and Canada. “A one-size fits all model of regulation is not the best model. It results in an insular culture that stifles creative regulatory insights and responses. It also invites regulator capture by becoming too closely aligned with the industry it is set up to regulate,” Crawford said. “A large, overly centralized regulatory scheme can also get bogged down in bureaucracy and become slow to act.”

Regarding the Canadian federal government’s proposed transition to a national securities regulator, she said, “Canada’s provincial securities regulators, all members of NASAA, have built a strong foundation for investor protection. We will support our Canadian colleagues to ensure that the strengths of the current system remain intact.”

In the coming months, she said that NASAA will focus on several areas of investment adviser regulation, including the extension of the fiduciary duty standard to all financial professionals who give investment advice; increasing the threshold for state-regulated investment advisers from the current US$25 million assets under management limit to US$100 million; and advocating on behalf maintaining state and federal jurisdiction for the regulation of investment advisers.

She also said NASAA will renew its call to scrap mandatory, industry-run arbitration for investors. “The harmful effects of mandatory arbitration have been well-documented in numerous studies. Both houses of Congress have responded with legislation that would prohibit the use of mandatory arbitration clauses in a wide range of consumer services, including securities. No further studies are necessary,” she added.

Additionally, Crawford said that it will look to improve regulatory efficiency, and she pointed to Canada’s registration reform as a step in that direction.

Crawford also announced NASAA’s new board of directors, including the New Brunswick Securities Commission’s Rick Hancox.

IE