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While the federal regulatory climate has shifted sharply under the new U.S. administration, the North American Securities Administrators Association (NASAA) is calling on Congress to uphold the role of state regulators.

In testimony before the U.S. House Financial Services Committee Tuesday, Amanda Senn, director of the Alabama Securities Commission and co-chair of the NASAA enforcement section, defended state securities regulators and their investor protection work.

At a Congressional hearing into policy proposals designed to promote capital formation, in part, by dismantling possible regulatory obstacles, Senn said that the group of state regulators supports the goals of fostering access to capital to growing businesses, but that it is “concerned that most of these proposals” will not achieve these goals as they are grounded in the theory that relaxing requirements for raising capital will lead to an increased number of public companies. 

In particular, she said that NASAA “remains very concerned” with proposals that would preempt state authority — and proposals that would “expand access to risky, opaque and illiquid markets without making complementary enhancements to private securities disclosures.” 

Among other things, she said that “Congress should empower efforts by state governments that are helping to prevent and mitigate financial fraud and similar harms to investors.

“Though markets are largely digital now, the fact remains that securities and investment advice continue to be sold to investors on Main Street. It is critical to have regulators with boots on the ground to perform the investor protection work vital for both businesses and investors,” she said, in defending state authority and resources for regulatory enforcement and investor education.

“NASAA continues to monitor developments at the federal level,” she noted, adding that state regulators will continue to work with each other and with federal authorities to protect investors. 

And, while she acknowledged that the U.S. accredited investor rules do need to be reformed, Senn argued that efforts to expand access to private markets need to required added transparency. 

“…We believe that none of the accredited investor bills under discussion should become law without Congress first incorporating private securities disclosure requirements into the legislation to strengthen investor protection and provide more information on these companies,” she said.