Op-Ed Template

Regulatory Reform: One Size Does Not Fit All

(470 words)

The chilling effects of the global financial crisis exposed how flaws in the financial services regulatory system have left investors out in the cold.

Now, as Washington works to transform financial services regulation, we must stay focused on the ultimate goal of restoring the trust and protecting the security of Main Street investors here in [JURISDICTION].

Regulating financial markets is an enormous challenge, one that can only be met by state and federal regulators working together to protect the integrity of the marketplace and to shield investors from fraud and abuse.

State securities regulators have a century-long record of investor protection and should play a pivotal role in the next generation of financial services regulation.

The North American Securities Administrators Association (NASAA), of which the [AGENCY] is a member, believes an improved system of financial services regulation must be collaborative, efficient, comprehensive and strong. The unique experiences of state securities regulators on the front lines of investor protection provide the framework of NASAA’s five core principles for regulatory reform.

First, the new approach to financial services regulation must build upon the collaboration between state and federal authorities.

Second, the new approach musttake advantage of opportunities to streamline this collaborative system. Better interagency communication is the key to greater efficiency. Existing federal and state agencies also need better monitoring practices to detect risk in financial markets, share their findings with one another and develop coordinated responses.

Third, the new approach must guarantee that no markets escape regulation. Gaps in the current regulatory system have allowed an enormous amount of capital to be traded on opaque financial markets, free from licensing, oversight and enforcement. Closing these regulatory gaps would ensure greater transparency for all financial markets, products and participants.

Fourth, the new approach must demandhigher standards of conduct in all financial sectors. For example, authorities should impose the fiduciary duty on all securities professionals who dispense investment advice, including broker-dealers. Every sector must be held to more stringent accounting standards and capital requirements to ensure transparency and solvency.

Finally, the new approach must toughen punishments for those who violate securities laws.

Some have called for a new federal bureaucracy to oversee the nation’s financial industry and markets. But one size doesn't fit all. A large consolidated federal regulator is no substitute for an accessible, proactive presence in communities nationwide.

As the regulators closest to investors, state securities regulators provide indispensable investor protections through enforcement, licensing, compliance examinations, and financial literacy programs.

Last year, for example, state-led investigations into the auction rate securities market meltdown led to settlements with major Wall Street firms to return $50 billion to ARS investors.

That’s smart, strong regulation – the kind that investors deserve and that the Obama Administration promises to give to the American people to protect them amid the challenges facing our financial markets.