2013 | 2014
In Pursuit of
Smart Regulation
& Investor Protection
NASAA Activity Report
North American Securities Administrators Association
Washington, D.C.
www.nasaa.org
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About NASAA
State and provincial securities regulators have been protecting investors from fraud and abusive sales practices since
the passage of the first "blue sky" law in Kansas in 1911 and since 1912 in Canada when Manitoba became the first
province to approve securities legislation. In the United States, state securities regulation preceded federal securities
laws, including the creation of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory
Authority (FINRA), formerly the NASD.
Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international
organization devoted to investor protection. NASAA is a voluntary association with a membership consisting of
securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and
Mexico.
As the preeminent organization of securities regulators, NASAA is committed to protecting investors from fraud and
abuse, educating investors, supporting capital formation, and helping ensure the integrity and efficiency of financial
markets.
NASAA represents and serves its members through advocacy, education, subject-matter expertise, communication
and coordination. NASAA values investor protection, education, respect for diverse views, building consensus, being
proactive, and active participation by all members of the organization. NASAA has a long history of advocating
for federal and state securities legislation, rulemaking and coordinated enforcement actions that advance the goal of
protecting investors.
About This Report
The 2013-2014 NASAA Activity Report is intended to showcase the wide variety of services performed by state and
provincial securities regulators throughout North America in their efforts to protect investors, assist small and local
businesses seeking investment capital and increase investor awareness.
Contents
· Leadership Message
· Member Activity Reports
· NASAA Activity Report
· Board of Directors & Committees
· Awards
· Corporate Office Staff
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Leadership Message
Leadership Message
One of my primary goals as NASAA president is to focus our
members on spreading the word about all of the good work that state
and provincial regulators do.
Our ability to effectively communicate our strengths and abilities
to the outside world, to fellow regulators and policymakers, is what
guarantees our continued role in the global securities markets.
Another key to preserving and expanding our role in the securities
markets is our willingness to modernize state and provincial regulation.
Only by working closely with industry and our fellow regulators in
embracing today's technology will we ever reach our full potential.
Importantly, it isn't more or less regulation that NASAA seeks, it is
simply smarter regulation regulation that does not shy away from the
reality that new technologies, even new modes of investing, are moving
forward and will continue to evolve, but affirmatively seeks solutions in
light of that reality to protect both businesses and investors from fraud,
liability and loss.
"It isn't more or less regulation
As NASAA presidents before me, I cannot look to the future without
that NASAA seeks, it is simply
asking what we regulators and policymakers can do to better protect
investors. Especially in times of economic recovery, after a significant
smarter regulation regulation
financial crisis, we need to find ways to preserve investor wealth and
that does not shy away from the
restore investor confidence in the integrity of our financial markets. We
reality that new technologies,
need to do all we can to root out fraud, lock up criminals, and make
even new modes of investing,
civil penalties commensurate with the offense in an effort to deter
future frauds. Nothing infuriates investors and the general public more
are moving forward and
than seeing fraudsters continue about their business without penalty.
will continue to evolve, but
Another way to regain investor trust and elevate their confidence in
affirmatively seeks solutions in
our markets is to raise securities professionals' standard of care.
light of that reality to protect both
The best way for us to restore integrity to our markets is to restore
businesses and investors from
investor confidence in regulators and industry alike.
fraud, liability and loss."
In so many ways, we are all in this together.
Andrea Seidt
NASAA President
Ohio Securities Commissioner
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In Pursuit of Smart Regulation
Investor
widely praised for their innovative use of technology to deter
investment fraud and support forensic investigations.
Confidence
Protecting Investors
NASAA members throughout North America focus on
Demands Smart
protecting retail investors, especially those who lack the
expertise, experience, and resources to protect their own
interests. By serving as a strong first line of defense for
Regulation &
investors, NASAA members strive to provide a level of
confidence needed to foster strong capital markets.
NASAA's 2013 Enforcement Report sheds light on the
Investor Protection investor protection role served by NASAA members.
The report, based on 2012 data, revealed several important
trends in investor protection and securities regulation,
NASAA members have protected Main Street investors for including continued investor reliance on state regulators to
more than 100 years, longer than any other securities regulator. address both traditional areas of securities fraud and emerging
They are responsible for enforcing state and provincial
issues.
securities laws by pursuing cases of suspected investment fraud, For example, in the wake of the "IA switch," where about
conducting investigations of unlawful conduct, licensing firms 2,400 investment advisers transitioned from federal to
and investment professionals, registering certain securities
state registration as mandated by the Dodd-Frank Act,
offerings, examining broker-dealers and investment advisers,
state regulators took important action to remove or bar
and providing investor education programs and materials to
unscrupulous actors from the licensed community. A total of
citizens in their jurisdictions.
3,564 licenses were withdrawn due to state action (an increase
In the United States, state securities regulators are the
of 27 percent over the previous reporting period), and 736
undisputed leaders in criminal prosecutions of securities
licenses were denied, revoked, suspended or conditioned.
violators.
Notably, many of the cases handled by state regulators
In Canada, provincial and territorial securities regulators are originated from federal exemptions that preempt state review.
Regulation D offerings, for example, were the
State Enforcement Statistics at a Glance
most common product involved in schemes
reported by the states. Other leading products
Complaints Fielded by Regulators
10,272 involved in enforcement actions brought by state
securities regulators include oil and gas offerings
Investigations
5,865 and real estate investments.
Enforcement Actions
2,496 According to the 2013 enforcement report
(administrative, civil, and criminal)
by the Canadian Securities Administrators,
NASAA members in Canada concluded 133
Investor Restitution Ordered
$694 million cases against 216 individuals and 166 companies.
Cases concluded resulting in fines and
Fines, Penalties, and Costs
$157 million administrative penalties of $35.4 million; almost
Assessed
$55 million in restitution, compensation and
disgorgement; and jail sentences handed down to
Jail Time Sentenced
1,361 Years eight individuals.
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. . . . . & Investor Protection
Drawing upon our experience with
The JOBS Act recognized the strong investor protection role
small businesses that want to
provided by state securities regulators in reviewing Regulation
create jobs, states are committed to
A offerings as part of the registration process.
exploring innovative ways to foster
State securities regulators have particular strengths that
uniquely qualify them to effectively oversee Regulation A
small business capital formation.
offerings. Because we are geographically close and accessible
Enhancing Capital Formation
to investors, states are in a better position than the SEC to
NASAA members are innovators when it comes to helping communicate with both small business issuers and investors to
small businesses throughout North America raise investment ensure that this exemption is not abused. Moreover, the states
capital. NASAA shares the desire of policymakers in the
are most familiar with the local economic factors that affect
United States and Canada for economic improvement by, in
small businesses and states have a strong interest in protecting
part, spurring private investment in small business. We believe investors in these types of offerings.
this goal is best achieved through restoring investor confidence Given the risky nature of investments in startups, and
and implementing laws with a balanced approach that reflects the fact that the states have traditionally been the primary
smarter regulation.
regulator of small offerings, NASAA believes state oversight
NASAA members serve as the primary regulators of
of these offerings is essential. However, we recognize the
most small company securities
need to change some of our long-standing policies to make
offerings. As such, NASAA
But our experience with investors Regulation A successful.
members regularly work with
NASAA members have no interest
tells us that we also need to create
and assist local businesses
in throwing up needless barriers to
an environment in which investors
seeking capital to grow their
economic development.
companies. To that end, NASAA feel sufficiently protected.
Toward that end, NASAA
has embarked upon a campaign
consulted with a task force of the
for "smarter regulation" regulation that takes advantage of
American Bar Association to develop a streamlined multi-
technology to make the offering process more efficient for
state program that peels back some of our normal guidelines
small businesses without sacrificing important protections for to accommodate this new type of offering.
investors.
As part of the program, NASAA has designed a multi-state
A first step in this direction involves modernizing
review process in which one or two states will take a lead role
Regulation A.
in reviewing a registration application and working through
When a company wants to raise capital by selling securities, any deficiencies with the company issuing the securities in a
the company must first register those securities with the
set timeframe.
government unless the securities are sold in a way that
NASAA developed this program to help ease regulatory
qualifies for an exemption from the registration process. Title compliance costs on small companies seeking to raise capital.
IV of the JOBS Act requires the SEC to adopt a rule to
NASAA also is developing a multi-state electronic filing
provide an exemption for certain offerings up to $50 million.
platform that will allow one-stop filing with all states, and we
Under the JOBS Act, these offerings will be exempt
intend to enhance the system to accommodate Regulation A
from SEC registration under the new Section 3(b)(2) of
offerings.
the Securities Act of 1933, but they would be subject to
The goal is to balance the legitimate
registration at the state level unless the securities are listed on interests of investors with the
a national securities exchange or sold to a qualified purchaser legitimate goals of entrepreneurs,and
as defined by the SEC.
to adopt policies that are fair to both.
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NASAA Member Activity | U.S.
Alabama Securities Commission
The Commission is sensitive to the financial concerns and long-term financial security
of Alabama citizens, whether individuals or small businesses, and acts quickly and
decisively when misleading or illegal practices undermine their confidence in
financial markets. In 2013, the Commission registered 145,910 broker-dealers,
investment advisers and mutual funds to conduct business in the state; secured 15 felony
criminal convictions; issued 30 administrative orders with 81 respondents; returned
$29.3 million in restitution and rescissions to harmed investors; contributed more than
$11.3 million to the state General Fund; issued 20 public warnings; and reached nearly
4,400 Alabamians through 75 public investor education presentations. Currently, the
Commission's prosecution team has 27 individuals awaiting grand jury actions, arrest or
trial.
Alaska Division of Banking and Securities
The Division sponsored a Fraud Summit in coordination with Alaska AARP and the
University of Alaska Center for Economic Development. Speakers included the Alaska
U.S. Attorney and representatives from the Division, the FBI, the SEC and the Alaska
Department of Law (Consumer Protection, Office of Elder Fraud and Assistance and
Office of Special Prosecutions, Medicaid Fraud Unit). Speakers described current fraud
trends in Alaska, including ways Alaskans can avoid financial fraud, and highlighted
how state, federal and local authorities work together to combat and prosecute fraud
in Alaska. Local media covered the event, interviewing several speakers and airing
stories about various topics discussed at the event. As a follow-up to the event, videos of
each speaker are in production to post to the Internet, giving Alaskans across the state
access to the information.
Arizona Securities Division
The Division, within the Arizona Corporation Commission, strives to preserve the
integrity of the financial marketplace through investigative actions as well as the
registration and oversight of securities, securities dealers and salespersons, and investment
advisers and their representatives; to enhance legitimate capital formation and deter
financial fraud; and to minimize the burden and expense of regulatory compliance by
legitimate business. In 2013, for example, the commission entered an order that requires
the prior managers of Radical Bunny, LLC and Horizon Partners, LLC to pay more
than $189.8 million in restitution for committing securities fraud in connection with
two unregistered deed of trust investment programs.
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Arkansas Securities Department
The Department took the lead in bringing state government to rural areas of Arkansas with
a series of "Protecting Arkansans" events. The eight sessions, conducted at different locations
within the state, brought representatives from various state agencies including the Securities
Department, Attorney General, Insurance Department, Department of Human Services,
and the University of Arkansas to meet, present, and answer questions. Topics included
investment and senior fraud, current scams, Medicare fraud, household finances, and healthy
living. In addition, attendees had the ability to visit agencies in a trade show setting, with
access to printed materials and one-on-one conversations with departmental representatives.
California Department of Business Oversight
The Department of Business Oversight provides protection to consumers and services to
businesses engaged in financial transactions. On July 1, 2013, the Department was formed by
the consolidation of the former Department of Corporations and the former Department of
Financial Institutions. California now has one centralized financial services regulator to ensure
effective enforcement of state financial laws intended to protect consumers. The Department
licenses and regulates hundreds of thousands financial services, products and professionals,
including 3,012 broker-dealer firms with 276,199 agents, 3,678 state investment adviser
firms, and 50,575 investment adviser representatives. In January 2014 the Department began
assessing an annual renewal fee of $25 for broker-dealer agents and investment advisors
seeking to operate in California. In 2013 the Department issued 252 enforcement actions
against unscrupulous financial companies and individuals that violated state financial
laws. One of those actions was a multistate enforcement action against WCM 777 (dba
World Capital Market, Inc., WCM777, Inc., and WCM777 Limited), an entity that ran an
unlicensed investment scheme that took in more than $10 million, including investments from
at least 5,500 Californians.
Colorado Division of Securities
Two Denver area firefighters, a husband and wife, complained to the Division about
irregularities in their investment account with a brokerage firm. They invested most of their
life savings through a financial adviser, a former fire department colleague. The Division
opened an investigation and learned the adviser neglected to inform his clients he had been
fired by his firm. Due to an internal error by the firm, the adviser was able to continue
accessing his clients' accounts, most of which was invested in a mutual fund. The adviser
periodically requested that the mutual fund positions be sold in four of his clients' accounts
and surreptitiously intercepted overnight deliveries of the proceeds. Investigators determined
the adviser used the money to purchase a townhouse, a private plane, and to pay for living
expenses. The Division filed a temporary restraining order freezing the adviser's assets.
Division prosecutors filed a criminal case, charging the adviser with securities fraud and theft.
He was sentenced to 12 years in prison. Part of the Division's investigation also examined
how the adviser was able to exploit the brokerage firms system to access accounts after his
termination. As part of the resolution of this inquiry, the brokerage firm reimbursed all of the
advisers's clients' losses, about $700,000.
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Connecticut Securities and Business Investments Division
In March 2013, five employees in the Division were honored by the U. S. Attorney's Office
for the District of Connecticut for their investigative efforts in significant federal criminal
prosecutions and civil cases in Connecticut over the past year. The employees received
recognition based on two cases. In U.S. v. Stephen Blankenship, an investment adviser pleaded
guilty to defrauding investors of about $600,000, was sentenced to 41 months incarceration
and ordered to make restitution to his victims. The U.S. Attorney's Office considered this
case to be "a text-book example of the effectiveness of coordination and teamwork among
local, state and federal members of the Securities Fraud Task Force." In U.S. v. Robin Brass,
a victim complaint to the Division initiated a federal investigation. The defendant was found
guilty of stealing nearly $2 million from her victims, many elderly and infirm, in a Ponzi
scheme and was sentenced to 96 months imprisonment.
Delaware Department of Justice, Securities Division
The Division obtained an indictment charging a New Castle County man with theft,
securities fraud, and tax evasion following its investigation of a scheme to defraud investors of
nearly $1 million in a case involving an unregistered agent selling unregistered securities. The
man also was charged with five counts of income tax evasion for failing to file an income tax
return or pay state income taxes from 2006 through 2010 on more than $1.3 million dollars
in taxable income.
District of Columbia Department of Insurance, Securities and Banking
At the request of the Department (DISB), the District of Columbia City Council
enacted the "DISB Fingerprint-Based Background Check Authorization Act of 2012,"
which authorized DISB to require license applicants to submit their fingerprints to
the Department so that it could request the FBI conduct Criminal History Background
Checks on applicants who were not already fingerprinted primarily investment adviser
representatives and a small category known as Agents of Issuers. Applicants for broker-
dealer agent licenses are fingerprinted as part of the FINRA licensing process. In 2013,
DISB took all the major steps toward full implementation of the legislation. DISB is one of
a handful of U.S. jurisdictions that requires all securities license applicants to submit their
fingerprints as part of the licensing process.
Florida Office of Financial Regulation
The Office was successful in obtaining preliminary injunctions and the appointment of a
receiver in two distinct investment fraud schemes targeting senior citizens with promises
of safe investments that paid a fixed, above market rate return. These cases involved about
$25 million invested by over 300 victims. Most of the money raised is alleged to have been
misappropriated or used to pay returns to investors in a Ponzi-like fashion. The Office
continues to work with law enforcement as needed to ensure the perpetrators of these
schemes are criminally prosecuted.
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Georgia Division of Securities & Business Regulation
As Commissioner of Securities, Georgia Secretary of State Brian P. Kemp in 2013
continued to educate Georgia-based entrepreneurs about the availability of the state's
Invest Georgia Exemption (IGE) as a potential source of capital for their small Georgia-
based businesses. The IGE is an exemption from state securities registration for small intra-
state offerings that rely on SEC Rule 147. IGE issuers may offer their securities publicly
as long as a notice filing is made with the Division. So far, the Division has received 16
such filings. One way of publicly offering those securities could include participating in a
crowdfunding portal. IGE issuers also could rely on traditional advertising, or simply offer
the securities privately (which would involve no filing). It is hoped that the IGE will provide
Georgia-based start-up companies and small businesses access to much needed capital for
developing new business ventures, expanding operations, and producing more Georgia jobs.
Hawaii Office of the Securities Commissioner
The Office has increased efforts in cyber investigation that has led to locating witnesses
and respondents with unparalleled speed and accuracy as well as identifying securities scams
happening on the Internet. In a recent case, the Office used a face recognition search to track
down a long-missing respondent. On the cusp of a federal expansion of crowdfunding, the
Hawaii Office of the Securities Commissioner is working to leverage innovative technology
to respond to securities fraud anywhere, including cyberspace.
Idaho Department of Finance
The Department settled two civil lawsuits in 2013 involving licensed insurance agents
who were not registered to offer or sell securities. In the first case, the agent admitted to
violating the securities salesman and securities registration provisions of Idaho securities
laws by offering and selling $400,0000 in unregistered life settlement contracts to five Idaho
investors. The issuer of the securities had filed for bankruptcy. In the second case, the agent
sold more than $600,000 in promissory notes associated with a Utah company. These sales
were intertwined with insurance business the agent conducted on behalf of a Utah financial
and insurance company that had several entities and its principal in bankruptcy. In both
cases, the securities violators agreed to disgorge their commissions.
Illinois Securities Department
The Department launched a new public awareness campaign aimed at encouraging people
to investigate before they invest. In Illinois, courts ordered scammers to repay more than
$33 million to victims the year before, and the Department handled more than 400 such
cases of investment fraud. The campaign includes television and radio ads airing statewide
to encourage people to research investment advisers and brokers, as well as investment
opportunities before investing any money. Investors can find information on how to
avoid potential con artists and scams by visiting the Secretary of State's website at www.
AvoidTheScam.net. In addition to the commercials, two videos were created to inform the
public about investment fraud. The videos were featured at statewide events and seminars
held by the department to educate potential victims, including seniors and members of
community and religious organizations.
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Indiana Securities Division
The Division finalized a $14 million settlement following a four-year investigation and
federal lawsuit alleging securities fraud against the Indiana State Teachers Association
and the National Education Association. The division alleged that the promise to invest
and the guarantee of a return on the unused portion of medical claim dollars associated
with the health plan offered by the state association was a security. The $14 million was
distributed among very grateful school districts that had various levels of participation in
the program, with the largest district receiving in excess of $3 million.
Iowa Securities Bureau
The Iowa Insurance Division, which includes the Bureau, launched a statewide public
education program "Iowa Fraud Fighters Shield Your Savings." The program will
educate and empower Iowans to prevent and report investment and insurance fraud.
The "Iowa Fraud Fighters--Shield Your Savings" program also includes six consumer
outreach and educational forums across the state. In addition to the community forums,
brochure and website, the public education program includes a TV and newspaper public
service advertising campaign.
Kansas Office of the Securities Commissioner
Officials from the Office filed criminal charges against a former financial adviser for
multiple violations of the Kansas Uniform Securities Act. The criminal complaint alleges
that the adviser committed securities fraud by unlawfully employing a scheme to defraud
seven individuals by selling securities resulting in victim losses of more than $700,000.
The adviser was charged with 39 felony counts of securities fraud and selling unregistered
securities.
Kentucky Department of Financial Institutions
Securities cases tend to be highly complex and document intensive. Moreover, white-
collar cases traditionally have lower priority than crimes involving persons. The
Department created the Prosecution Assistance Unit to assist state and federal
prosecutors in the prosecution of cases involving criminal violations of the securities
laws. In addition the PAU also provides the investigative support to successfully bring
securities cases to trial.
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Louisiana Office of Financial Institutions, Securities Division
Based on a joint investigation conducted by the Securities Division of the Office of
Financial Institutions, the Federal Bureau of Investigation, the Texas State Securities
Board, and the Securities Division of the Mississippi Secretary of State, a Louisiana
hedge fund operator was indicted on 18 counts of mail fraud by a federal grand jury in
Baton Rouge. According to the indictment, the man sent account statements to investors
showing positive investment returns, when he had in fact lost 98 percent of their assets.
The indictment further alleges that by sending the false account statements, the hedge
fund operator was able to conceal the losses in the hedge funds and defraud victims into
keeping their money in the funds, thus allowing the operator to continue receiving fees
for his personal benefit. If convicted, the operator faces a maximum sentence of 20 years
in federal prison for each count of mail fraud.
Maine Office of Securities
The Office was instrumental in developing and launching "Senior$afe,"the first
program in the nation to train bank tellers and credit union staff to identify and report
suspected cases of elder financial abuse. The training program is a collaboration with
the Council for Elder Abuse Prevention, the Maine Office of Aging and Disability
Services, Maine's Department of Professional and Financial Regulation, Legal Services
for the Elderly, and organizations representing the state's banks and credit unions.
Maryland Division of Securities
After completing the switch of almost 100 Maryland-based firms from federal to
state investment adviser registration, the Division focused its attention on a series of
enforcement cases involving entities that violated the investment adviser provisions
of the Maryland Securities Act. Violations included acting as unregistered investment
advisers, engaging in fraud in providing investment advice and in offering and selling
securities, and offering and selling unregistered securities. Cases resulted in revocations
of individual's and entities' registrations, bars from the investment advisory and securities
businesses, and restitution payments being made to defrauded investors.
Massachusetts Securities Division
In 2013, Secretary of the Commonwealth William F. Galvin announced settlements
with five independent brokerage firms that improperly sold non-traded REITs. Under
the settlements, the firms will make restitution to investors of at least $8.6 million
and pay fines totaling $975,000. The Division's investigation revealed significant and
widespread problems with the firms' compliance with their own policies, practices and
procedures rules, and adherence with Massachusetts prospectus requirements, leaving
investors often trapped in illiquid and underperforming financial products. In 2013
Citigroup Global Markets Inc. paid a $30 million fine to Massachusetts to settle
charges a company analyst improperly shared research with large investors in advance,
giving them the chance to profit from weaker sales of iPhones. The information was not
shared with other investors until a day later.
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Michigan Corporation, Securities and Commercial Licensing Bureau
The Bureau conducted a free investment adviser training seminar, which was open to
all state-registered firms and applicants. The seminar provided over 150 attendees with
information on current regulatory developments, CRD/IARD updates, and guidance on
how to conduct proper due diligence on their firm's sub-advisers and other outsourced
service providers. The seminar finished with a presentation on what to expect during a
state examination and recommended best practices that all attendees were encouraged
to adopt to ensure compliance with relevant Michigan statues. Attendees were able to
ask registration and examination questions in a relaxed, educational setting. The seminar
received excellent reviews and the Bureau plans to continue these programs in 2014.
Minnesota Department of Commerce
The Department, in conjunction with 19 jurisdictions throughout the United States
and Canada, took coordinated action against Profitable Sunrise, an international
entity allegedly operating an Internet scheme to defraud investors. The Department's
investigation found that two individuals in Minnesota were allegedly participating in the
investment scheme, soliciting investors but not licensed to sell securities in the state. The
investment model of Profitable Sunrise is characterized as the "charitable platform" for a
money lending group. As an incentive for attracting additional investors, a three-tiered
referral opportunity is extended to investors, making it identical to a pyramid or multi-
level sales approach.
Mississippi Securities Division
In an effort to help small businesses and entrepreneurs understand the capital
formation process, the Division of the Mississippi Secretary of State's office published
a useful brochure outlining the state securities laws that may apply to small businesses
interested in seeking investors or raising money. This color brochure, which is available
on the Division's website, includes an overview of the Mississippi Securities Act in
addition to a discussion of the Act's anti-fraud standards, registration requirements and
coordination with the federal securities laws exemptions.
Missouri Securities Division
The Division worked to secure more than $4 million in restitution for Missouri
investors and collected nearly $1 million in fines and penalties over the course of 127
investigations in 2013. With the help of state and federal authorities, referrals from
the Division resulted in 15 individuals being sentenced to more than 119 years in jail
for stealing from Missouri investors in 2013. The Division also successfully visited and
audited all 30 investment adviser firms from the IA Switch within their first year as
Missouri-registered investment advisers.
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Montana Securities Department
In 2013, the Department introduced a bill, successfully lobbied the Legislature, and
obtained a designated income stream for the state's Securities Restitution Assistance
Fund, one of only a few offered in the nation to help victims of securities fraud recover
losses that otherwise are unrecoverable. Now, part of the fees paid by investment
companies that previously had gone to the state general fund is being placed in
the restitution fund to ensure adequate funding for victims' requests. In 2013, the
department received applications from 37 victims and paid out restitution assistance
totalling $317,207.50. More than 75 percent of the victims were over the age of 70.
Nebraska Bureau of Securities
Nebraska celebrated its 100th year of securities regulation. During this centennial year,
the Bureau saw a record number of agent and RIA applicants and made significant
progress with its Citizenship Verification initiative. Notably, the Bureau saw the
expansion of its staff with the hiring of four new employees -- the next generation of
securities regulators in Nebraska.
Nevada Securities Division
The Division strives to ensure the integrity of the securities marketplace through
investigative actions as well as the registration and/or oversight of securities, securities
dealers and brokers, investment advisors and their representatives; to enhance legitimate
capital formation; and to minimize the burden and expense of regulatory compliance by
legitimate businesses. In 2013, a Division investigation led to a 10-year prison sentence
for a Reno attorney who fraudulently swindled eight victims out of more than $1 million
in part through a speculative energy investment scheme.
New Hampshire Bureau of Securities Regulation
The Bureau conducted a successful public service announcement campaign to raise
awareness about investment fraud. The PSA series, entitled "I'm a Con Man," was created
by fellow NASAA member state New Mexico, which authorized its adaptation by New
Hampshire and other NASAA members. The effectiveness of the PSAs was evident from
the number of calls to the Bureau. They ranged from requests for investor education
materials to inquiries regarding the licensing and registration status of registered
representatives to questions about current products being offered. This campaign
demonstrated once again how the willingness of the states to collaborate helps make
NASAA strong.
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New Jersey Bureau of Securities
The Bureau led a multi-state investigation, coordinated by NASAA, that resulted in
2013 to an agreement by UBS Financial Services, Inc. to settle violations stemming from
unregistered personnel accepting orders for the purchase and sale of securities. As part
of the settlement, UBS agreed to pay up to $4.58 million in civil penalties among the 50
states, District of Columbia, Puerto Rico and the U.S. Virgin Islands. UBS revised its
client transaction processes and supervisory procedures to address the violations.
New Mexico Securities Division
In collaboration with Native Community Finance, the Division launched a statewide
initiative to educate and prepare Native investors so that they can protect themselves
from financial fraud and can learn about strategies to grow their assets through sound
investments. In 2013, the initiative included a series of 23 investor protection and
education seminars and an outreach campaign targeting Native audiences. A media
outreach campaign to raise awareness about the initiative reached more than 200,000
Native people across the state. The Division also produced radio infomercials with well-
known Native spokespersons and distributed them to popular New Mexico community
radio stations. It participated twice on Native America Calling, a talk radio show on
National Public Radio.
New York Investment Protection Bureau
In November 2013, Attorney General Eric T. Schneiderman and other members of the
joint state and federal RMBS Working Group announced a $13 billion settlement with
JPMorgan Chase the largest with a single entity in American history to resolve civil
claims arising out of the packaging and sale of residential mortgage-backed securities.
The settled claims included the complaint Attorney General Schneiderman filed against
JPMorgan in October 2012 alleging fraud under New York's Martin Act. As part of the
settlement, JPMorgan acknowledged that it misrepresented to RMBS investors that the
mortgage loans it packaged in various securities complied with underwriting guidelines.
New York State will receive more than $1 billion of the $13 billion settlement: $613
million in cash and approximately $400 million in consumer relief, including mortgage
modifications for homeowners at risk of foreclosure.
North Carolina Securities Division
In 2013, the Division was the first securities regulator in the international community
to issue a Cease and Desist Order in the alleged Ponzi scheme known as "Profitable
Sunrise." The Division also saw combined prison sentences of 26 years handed out to 4
people convicted for their roles in various scams. With regard to its investor education
efforts, the Division conducted 140 investor education presentations reaching over
5,400 people across the state. The division also joined the North Carolina Conference
of District Attorneys in co-sponsoring a two-day multidisciplinary course geared to
prosecutors, victim witness legal assistants, law enforcement officers, Adult Protective
Services staff, senior advocates, and other allied professionals. The course attracted 180
attendees and addressed both the physical and financial abuse of the elderly.
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13
NASAA Member Activity | U.S.
North Dakota Securities Department
In 2013, a former securities broker who defrauded 18 clients of more than $900,000
in a Ponzi-like scheme was sentenced to 10 years in prison. The prosecution was the
result of an investigation of investor complaints by the Department, which uncovered
the fraudulent scheme, and a subsequent criminal referral to the Cass County State's
Attorney.
Ohio Division of Securities
In 2013, the Division successfully completed the first on-site examination of all Ohio-
based mid-sized investments advisers that switched from SEC to state registration,
all within the firm's first year of state registration. Ohio examines all of its home state-
registered investment advisers on a three-year risk basis. Ohio continued its focus on
criminal violations of Ohio's Securities Act with six new cases resulting in a criminal
indictment, conviction, or sentence in 2013. Five of those cases involved the sale of
unregistered securities. As part of a larger multi-state administrative investigation,
Ohio issued a cease and desist order and obtained a preliminary injunction against an
Ohio promoter regarding a high-yield investment and affinity fraud scheme known as
"Profitable Sunrise." The Division works closely with local industry and practitioners
through advisory committees and its annual Ohio Securities Conference, which attracted
about 150 attendees and speakers from FINRA and leading Ohio securities scholars.
Oklahoma Securities Commission
In November 2013, an Oklahoma woman was released from prison after serving 10
years in connection with a Ponzi scheme uncovered by the Department during a
broker-dealer examination. In December 2013, the appointed receiver made the last
distribution to investors who lost over $9 million, making the investors whole as to
their principal. This recovery was due to legal battles waged by the Department and
the receiver before the Oklahoma Supreme Court, the U.S. Bankruptcy Court, and the
Tenth Circuit and investor arbitrations. The Department and the receiver sued 163 relief
defendants whose profits exceeded the amounts of their initial investments. A portion
of the recovery was received in the Department's aiding and abetting case against an
Oklahoma bank through which over $200 million flowed as part of the Ponzi scheme.
Oregon Division of Finance & Corporate Securities
Scam Jam Oregon, a first-ever event to help consumers recognize and prevent
financial fraud and scams, was so successful it had to move to a larger room in Portland's
Convention Center. More than 600 people listened to speakers, received one-on-one
advice from nonprofit, government and consumer advocates, and posed questions to a
panel on identity theft, false advertising and telemarketing at the event hosted by the
Division, the Oregon Department of Justice and AARP Oregon. The event garnered
excellent news coverage, including a story about a woman who got caught in a fraudulent
gold mine investment scheme and complained to DFCS. A similar event is being
planned in southern Oregon and a second Portland Scam Jam is planned for October.
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14
NASAA Member Activity | U.S.
Pennsylvania Department of Banking and Securities
The Department elevated its outreach to members of the military by becoming a
founding member of the Pennsylvania Military Finance Alliance, a first-of-its-kind
collaboration that will host a series of military-focused financial education conferences
titled "Making $ense of Finance." The Alliance is quickly becoming the premier military
outreach network in Pennsylvania and strives to educate service members, veterans
and their families on ways to protect themselves from investment fraud and enhance
their financial readiness. Its membership consists of government agencies, nonprofits
and military-related organizations approved by the U.S. Department of Defense. The
Department regularly works with Family Assistance Centers, veterans groups and
others to share distribution networks and serve as part of a statewide speakers bureau
on important investing topics. Because of its military outreach, the Department recently
joined the Governor's Advisory Council on Veterans Services.
Puerto Rico Commissioner of Financial Institutions
The Office has been working hard to better protect investors. Many financial education
conferences have been offered to students, seniors and the general public. Investor
alerts have been posted in the office's website in English and Spanish. The Office
has been working with a new system, called "ERIC II," to improve the processing of
registration of securities by notification. The Office also has worked in cooperation
with state and federal authorities as expert witnesses to prosecute violators of securities
laws. The Examination Division has detected unethical practices by broker-dealers and,
in conjunction with the Legal Division, has reached settlement agreements to obtain
restitution for investors.
Rhode Island Department of Business Regulation
In 2013, the Department issued a consumer alert to help protect Rhode Island residents,
especially those in the Filipino community, considering making charitable donations
in the wake of Super Typhoon Haiyan. The alert reminded residents to check with the
Department before donating to ensure the charity or fundraiser is properly registered in
the state.
South Carolina Securities Division
The Division discovered and stopped a securities fraud scheme operating under
the guise of building a private school. A South Carolina investment adviser and his
wife solicited investments to build and operate the school buoyed by promises of an 8
percent return. Though investment money was used to buy land and partially construct a
building, the adviser also used those funds to buy his house, jewelry, and groceries, among
other things. The Division also uncovered an unrelated fictitious investment trust. Instead
of investing the trust money, the adviser converted these funds to his own use. The
Division's investigation started as a regular audit and grew as facts and victim complaints
were uncovered. The adviser's accounts were frozen and ultimately turned over to a court-
appointed receiver charged with marshaling the assets for the benefit of investors.
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NASAA Member Activity | U.S.
South Dakota Division of Securities
The Division completed its 8th year of holding the Investor Education Essay Contest
for South Dakota high school seniors. The competition fielded 197 essays by students
from 27 high schools throughout the state. This year's contest featured five topics: mutual
fund vs. variable annuity; using a financial calculator, illustrate how you can obtain $1
million by the age of 65; describe what it means to have a diversified portfolio; explain
two types of investment fraud; and discuss the differences between a securities broker-
dealer and a securities investment adviser. In all, $25,200 was awarded to contest winners.
Tennessee Securities Division
The Division contributed to an investigation of an $18 million Ponzi scheme that
resulted in the guilty plea of three men for their involvement. The men offered clients
the opportunity to invest through promissory notes. More than half the money went
to repay earlier investors, to pay salaries and overhead, or to personal expenses. The case
began in 2005 when the Tennessee Bureau of Investigation and the Division conducted
an undercover investigation that resulted in a bank record analysis, which led to multiple
affidavits, a temporary restraining order, and asset freeze of business banking accounts.
The case and records went to the State Attorney General's office as a criminal referral.
The defendants were indicted by the FBI in 2009 and awaited prosecution until their
guilty plea.
Texas State Securities Board
The Texas State Securities Board expanded its outreach to prosecutors throughout
Texas during the year and provided trial-ready teams with expertise to secure convictions
for securities fraud and related offenses that included the assessment of prison terms of
85 years, 80 years, 40 years and 25 years in unrelated and geographically dispersed cases
in Texas state courts.
U.S. Virgin Islands Division of Banking and Securities
The mission of the Division is to serve and protect the public interest by aggressively
enforcing the insurance, securities and banking laws in the Virgin Islands, while at the
same time, assisting the insurance and banking industries to better serve the public.
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NASAA Member Activity | U.S.
Utah Division of Securities
In 2013, the Division helped form a "State Fraud Task Force" to address issues related
to annuity regulation and enforcement. In Utah, fixed annuities are insurance products
regulated by the Utah Department of Insurance. Variable annuities are securities. The
individual sales agents should be licensed both as an insurance agent with the Utah
Department of Insurance and as a broker-dealer agent with the Division. Equity-
indexed annuities, however, are deemed to be a fixed annuity and are regulated by
the Utah Department of Insurance, not the Division. The task force was formed due
to this complex "regulatory situation," the high amount of annuity sales in Utah, and
the increased incidence of "free meal educational opportunities," newspaper ads and
possible violations in this area. The group includes the Utah Department of Commerce
(Divisions of Securities, Corporations, Real Estate, & Consumer Protection) and the
Utah Department of Insurance. During quarterly meetings, joint regulatory cases
are discussed, and new or possible repeat violations are made known to both groups.
Through these coordinated efforts, 26 individual's insurance licenses have been either
revoked or flagged not to license in the future.
Vermont Department of Financial Regulation
An investigation by the Department resulted in the return in 2013 of more than
$130,000 to Vermont investors who invested in an oil and gas exploration project in
Texas. An additional $20,000 was paid in fees and penalties and a portion will go to the
Department's investor education fund. An investigation by the Department determined
that sales representatives for Surety Services LLC of Delaware were doing business in
Vermont, but were not registered to do so. In June 2008, several Vermont residents were
invited to Surety's South Burlington office for a presentation by the president of the
Texas company, AOE Operators. As a result, four Vermonters and one Vermont company
purchased interests in the oil and gas rights of AOE. The shares were not registered in
Vermont, which also is a violation of Vermont law.
Virginia Division of Securities & Retail Franchising
An investigation led by the Division and the FBI led to the conviction of a Virginia
man charged with defrauding investors of more than $800,000 from a project aimed
at purportedly developing a treatment for Human Immunodeficiency Virus infection/
Acquired Immunodeficiency Syndrome (HIV/AIDS).The fraudster was sentenced to
108 months in prison.
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NASAA Member Activity | U.S.
Washington Department of Financial Institutions Securities Division
In July 2013, the Division saw the successful closure of a major Ponzi scheme it played
a significant role in stopping when a fraudster pleaded guilty in federal court in Seattle
to wire fraud and money laundering charges. The Ponzi scheme raised more than $30
million from more than 200 investors between 2006 and 2009. In December 2013,
the fraudster was sentenced to 10 years in prison and ordered to pay more than $18
million in restitution. In May 2010, the Division brought an administrative case against
the man, his companies, and five of his associates alleging they had sold unregistered
securities, committed securities fraud, and acted as unregistered securities salespersons
or broker-dealers. The Division also made a major contribution to the criminal case,
working closely with the U.S. Attorney's Office, the IRS, and the FBI. DFI had primary
responsibility for tracing the investors' funds. Division employees spent more than 3,500
hours on this task over a three-year period. Robert Kondrat, Supervisor of the Criminal
Unit, was a key member of the prosecution team for the case as a Special Assistant
United States Attorney.
West Virginia Securities Commission
The West Virginia State Auditor's Office, which includes the Commission, sponsored
its 11th annual Finance University, training 37 high school teachers from 25 West
Virginia counties. The program brings teachers together to hear experts explain personal
finance topics. Finance University was developed by the West Virginia State Auditor's
Office and partners of the West Virginia Jump$tart Coalition in 2003. Since that time,
more than 200 teachers throughout West Virginia have participated. The program has
been recognized as a best practice for teacher training in the U.S. Financial Literacy
Education Commission's National Strategy for Financial Literacy.
Wisconsin Division of Securities
In 2013, the Division successfully finished examining all investment advisers that
had switched in 2012 from SEC to state regulation. More than half of these advisers
had never been examined by the SEC, and many had not been recently examined, so
they welcomed our state examiners as a resource for their questions. One switch adviser
subsequently stated that he was impressed with the quality of state regulation because
he found it more flexible to the business being regulated instead of one-size-fits-all. The
Division added value to the relationship with newly registered advisers by publishing an
e-newsletter sent to all state-registered investment advisers on compliance-related and
other timely topics, and being available on an Examiner of the Day phone line.
Wyoming Compliance Division
The Division revamped its Investor Awareness program. In 2013, Wyoming partnered
with the AARP and the Securities and Exchange Commission's Office of Investor
Education and Advocacy. Given the large geographic size of the state and the small
number of staff in the Division, this partnership allowed the Division to reach a much
larger group than on its own. Outreach included presentations, each with an attendance
of 150-300 individuals; a panel presentation on Wyoming PBS; and articles in each
quarterly newsletter distributed to seniors across the state.
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NASAA Member Activity | Mexico
Comision Nacional Bancaria y de Valores
On January 9, 2014, financial reform legislation was signed into law. The new
legislation amends 34 different financial laws and strengthens the Mexican banking and
securities sectors by increasing competition, improving guarantee collection, lowering
borrowing costs, and enhancing transparency.. Among other issues, this reform makes it
mandatory for investment advisors to register before the Comision and be certified by a
self-regulatory organization. This measure will reduce regulatory arbitrage by investment
advisors in regards to commercial banks and broker/dealers. Regarding mutual funds,
the reforms introduce a more flexible framework that facilitates their authorization,
incorporation, and operation procedures. The financial reform is part of a series of
structural reforms that will contribute to Mexico's economic growth and prosperity.
NASAA Member Activity | Canada
Alberta Securities Commission
The Commission held many education and outreach seminars throughout 2013,
including industry-focused sessions for exempt market dealers and portfolio managers
to help them learn more about their regulatory obligations. The Commission also
presented to various community organizations such as the Canadian Association for
Retired Persons (CARP), the Better Business Bureau and several financial institutions
on a broad range of topics, including how to recognize investment fraud, available
Commission resources and how to best work together to protect the public. To increase
Albertans' awareness of investor education resources, the Commission posted a `Daily
Tip' for investors on its Twitter page (@ASCUpdates) throughout Investor Education
Month (October 2013). The Commission also alerted the public of potential misconduct
and fraud by issuing investor alerts, posting blogs on current issues and running weekly
`Consumer Update' radio ads on rural radio stations.
British Columbia Securities Commission
The Commission in November 2013 created new on-line materials and province-wide
presentations aimed at informing small businesses about British Columbia's capital
raising rules. The publication, Capital Raising for Small Business, is a free guide that
covers: defining a security and the key principles of securities laws; discussing differences
between the private placement market and public capital markets; explaining exemptions
and how they apply when raising capital; and describing what information investors may
seek from small businesses. The guide is available for download on the Commission's
website. A video preview of the guide is on the Commission's YouTube page.
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NASAA Member Activity | Canada
Manitoba Securities Commission
In 2013, the Commission (MSC) and Winnipeg Police Service teamed up to
help Manitoba's professionals recognize investment fraud with a pair of pop-up
events in downtown Winnipeg. These events aimed to get investors talking about
where and how investment scams can happen, and marked the launch of the MSC's
RecognizeInvestmentFraud.ca website and educational campaign. Between the two
events, more than 3,000 information packages were handed out, and traffic to the
RecognizeInvestmentFraud.ca site spiked by more than 4,000 pageviews, all of which
were boosted thanks to a successful outdoor media campaign, as well as radio and online
ads that promoted listeners and viewers to learn the red flags of investment fraud.
New Brunswick Financial & Consumer Services Commission
The Commission has a new name and expanded mandate. The Financial and Consumer
Services Commission (FCNB) was created in July 2013 when the provincial government
brought together the regulators of insurance, pension, consumer affairs, financial
institutions and securities into one independent, self-funded entity. The FCNB has
created a new web resource to make it easier for New Brunswickers to find answers to
financial and consumer questions and provide them with information to protect them
from fraud and to make informed financial decisions. The FCNB also launched its first
public awareness campaign focused on each of the sectors that it regulates.
Newfoundland & Labrador Financial Services Regulation Division
The Division uncovered evidence that a firm allegedly located in Zurich, Switzerland,
unlawfully traded securities and solicited residents to invest in the foreign exchange
market, known as forex, and other securities. Neither these entities nor its agent were
registered to solicit or trade in securities in this jurisdiction. The agent used radio
infomericals in Newfoundland and Labrador and at least one other province in Canada
to solicit residents to invest money though offshore wire transfers to the United
Kingdom. Investigators believe that the funds were then transferred to other countries.
The Superintendent of Securities issued a permanent Cease Trade Order prohibiting
the accused entities and its agent from acting, advertising, soliciting, conducting or
negotiating directly or indirectly in furtherance of the trade of securities in the province.
Northwest Territories Office of the Superintendent of Securities
The primary mandate of the Office is to protect the investing public. The Office serves
as a gatekeeper for firms and their representatives wishing to sell securities to the public.
In addition, the Office reviews prospectuses and applications for exemptive relief, takes
enforcement action against persons and companies who have violated securities laws
and provides various services to the public, such as: the filing of disclosure documents;
the registration of dealers, advisers and representatives of securities; and responding to
investor complaints and providing investor education.
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20
NASAA Member Activity | Canada
Nova Scotia Securities Commission
The Commission approved a settlement agreement that found that providing escrow
services and intermediating trades between companies and investors requires registration.
The respondents admitted to funneling more than $1.7 million through their bank
accounts, more than $350,000 of which related directly to stock purchases. The
respondents agreed to 15-year bans on the use of exemptions and on their ability to
register with the Commission. The respondents also agreed to pay an administrative
penalty of $60,000 and costs of $5,000. In 2013, the Commission also partnered with a
local Girl Guides troop to deliver investor education to youth ages 912. The presentation
helped 28 girls receive their financial literacy badge.
Nunavut Office of Superintendent of Securities
The Office is within the Department of Justice, which promotes and protects a peaceful
society through the administration of a justice system which respects the role of
community members in maintaining harmony, and which adheres to the principles and
values of Inuit Qaujimajatuqangit.
Ontario Securities Commission
The Commission's increasing engagement with stakeholders has improved its
understanding of their needs and affects how it undertakes outreach, education,
regulatory policy, compliance oversight and enforcement work. This includes OSC in
the Community, an outreach program launched in 2013 to talk directly to investors
from Ontario about how they can be more informed about their investments and
advisors, and how to recognize frauds and scams. A multi-faceted initiative, OSC meets
with area businesses, government, law enforcement, post-secondary institutions and
other community organizations impacted by the province's securities regulation. The
Commission visited more than 10 Ontario cities. Investors have shared their feedback
from OSC in the Community and attendees indicate they're getting useful information.
These meetings also have helped establish relationships with local business communities
and show the Commission is an accountable and transparent organization.
Prince Edward Island Department of Environment, Labour & Justice
As part of a settlement approved by the Prince Edward Island Superintendent of
Securities, a firm agreed to offer a return of investment to investors, was prohibited
from exempt market capital-raising activities in Prince Edward Island for five years, and
was ordered to prepare and deliver audited financial statements for the past three years.
The firm was involved in distributing securities to Prince Edward Island residents in a
manner that did not comply with Prince Edward Island securities law. In Canada, the
exempt market involves the sale of private investments that do not require that investors
be provided with a prospectus. In a two-year period, the firm raised about $700,000 from
36 Prince Edward Island investors without properly relying on the accredited investor
exemption to the prospectus requirement under Canadian securities laws.
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21
NASAA Member Activity | Canada
Quebec Autorite des marches financiers
The AMF Quebec started a unique project -- a monthly webinar on investor
education (IE) tools and programs available in Quebec and Canada. This free webinar
offers one unit of continuing training and education to registered advisors. The content
includes an overview of financial literacy and the main tools, programs, calculators, and
brochures offered that might be of interest for the advisors' clients. Advisors also are
given an overview of initiatives related to AMF Quebec's network of financial education
specialists and its partners' educational tools and projects. Advisors are invited to order
hard copies of the material. Brochures are written in plan language and help investors be
prepared to meet their advisor.
Saskatchewan Financial and Consumer Affairs Authority
In December 2013, the Authority began allowing small businesses and start-ups in
Saskatchewan to sell stakes in their companies to residents of the province through
the Saskatchewan Equity Crowdfunding Exemption. The government's Plan for
Growth: Vision 2020 and Beyond highlights the importance of helping Saskatchewan
small businesses and start-ups meet the challenges of growth. Protecting the public
interest is at the top of FCAA's priorities. In addition to other precautions, the Equity
Crowdfunding Exemption limits the amount of money individual investors can risk and
how much individual companies can raise.
Yukon Office of the Superintendent of Securities
In September 2013, the Yukon Government invited a 60-day public review of new
and amended regulations that are the final step in modernizing Yukon's 30-year-old
business legislation. When approved, these regulations will proclaim amendments to the
Business Corporations Act, Partnership and Business Names Act, Societies Act and Cooperative
Associations Act, as well as consequential amendments to the Personal Property Security
Act brought about by a complete new Securities Transfer Act. The Business Legislation
Reform Project began in 2008 in parallel with the proclamation of a new Securities
Act, and followed with amendments to the above noted Acts in 2010, as well as further
amendments to the Securities Act in Fall 2012 as part of an ongoing provincial and
territorial securities harmonization initiative in Canada. When complete, Yukon will
have some of the most robust and modern business and securities legislation in Canada,
creating an environment that is welcoming to business while providing appropriate
safeguards to Yukon investors.
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NASAA Activity | Sections
Broker-Dealer
Overview
2013-2014 Section Committee
2012-2013 Section Committee
The point-of-sale contact that broker-dealers have with
Bryan Lantagne (MA), Co-Chair John Cronin (VT), Chair
investors makes the work of the Broker-Dealer Section critical Tanya Solov (IL), Co-Chair
Marc Minor (NY), Vice Chair
in achieving NASAA's mission of investor protection. The
Pamela Epting (FL)
Bryan Lantagne (MA)
Section focuses on issues involving broker-dealers and agents, Michael Youngberg (SD)
Tanya Solov (IL)
such as arbitration, qualification and licensing requirements, Chris Besko (MB)
Michael Youngberg (SD)
record keeping and compliance requirements, continuing
Joseph Brady (NASAA)
Chris Besko (MB)
education, and practices involving investors. The Section offers
Joe Opron (NASAA)
official comments on rule proposals; participates in discussions
with industry, SROs, and federal regulators regarding trends
and concerns in the brokerage industry; and provides guidance 2013-2014 Project Group Chairs 2012-2013 Project Group Chairs
to states on broker-dealer issues. The Section oversees the
activities of its project groups: Arbitration, Continuing
Leslie Van Buskirk (WI)
Leslie Van Buskirk (WI)
Education, Exams Advisory, Investment Products/Services,
Arbitration
Arbitration
Market and Regulatory Policy and Review, Operations and
Linda Bailey (TX)
John Cronin (VT)
Variable Annuities. In addition, the Section works closely with Continuing Education
Continuing Education
the CRD/IARD Steering Committee.
William Cahill (MA)
William Cahill (MA)
BD Exams Advisory
BD Exams Advisory
Carol Anne Foehl (MA), Chair
Carol Anne Foehl (MA)
Investment Products/Services
Investment Products/Services
Carolyn Mendelson (PA)
Carolyn Mendelson (PA)
Market & Reg. Policy/Review
Market & Reg. Policy/Review
James Nix (IL), Chair
Tanya Solov (IL)
Operations
Mergers & Acquisitions/Finders
Mark Kissler (WA), Chair
James Nix (IL)
Variable Annuities
Operations
Mark Kissler (WA)
Variable Annuities
Arbitration Project Group Chair Leslie Van Buskirk of
Wisconsin listens as 2012-2013 Broker-Dealer Section
Chair John Cronin of Vermont addresses attendees at
NASAA's annual conference in Salt Lake City.
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23
NASAA Activity | Sections
Corporation Finance
Overview
2013-2014 Section Committee
2012-2013 Section Committee
NASAA members have long helped facilitate capital
Jan Owen (CA), Chair
William Beatty (WA), Chair
formation at the state and local level. NASAA members
Peter Cassidy (MA), Vice Chair
Peter Cassidy (MA), Vice Chair
assist entrepreneurs with their business plans and help them Mark Heuerman (OH)
Michael Benson (PA)
obtain resources to grow their enterprises and create local
Faith Anderson (WA)
Anetria Connell (KY)
jobs. The Corporation Finance Section also develops and
Jeff Soderstedt (PA)
Colleen Monahan (CA)
monitors policies for the registration of securities under state Susan Powell (NB)
Susan Powell (NB)
law. The Section oversees the activities of six Project Groups:
Rick Fleming (NASAA)
Coordinated Interpretations, Business Organizations &
Accounting, Corporation Finance Policy, Direct Participation 2013-2014 Project Group Chairs 2012-2013 Project Group Chairs
Programs Policy, Franchise and Business Opportunities, and
Small Business/Limited Offerings.
Joy Sakamoto-Wengel (MD)
Marlene Sparkman (TX)
Coordinated Interpretations
Coordinated Interpretations
Seth Hertlein (OH)
Seth Hertlein (OH)
Business Organizations and
Business Organizations and
Accounting
Accounting
Dennis Britson (IA)
Dennis Britson (IA)
Corporation Finance Policy
Corporation Finance Policy
Mark Heuerman (OH)
Mark Heuerman (OH)
Direct Participation Programs
Direct Participation Programs
Policy
Policy
Dale Cantone (MD)
Dale Cantone (MD)
Franchise and Business
Franchise and Business
Opportunities
Opportunities
Faith Anderson (WA)
Faith Anderson (WA)
Small Business/Limited
Small Business/Limited
Offerings
Offerings
William Beatty of Washington, 2012-2013 Corporation Finance
Section Chair and current NASAA President-elect, oversaw
the development of NASAA's new coordinated multi-state
review protocols for Regulation A offerings to ease regulatory
compliance costs on small companies seeking to raise capital.
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24
NASAA Activity | Sections
Enforcement
Overview
2013-2014 Section Committee
2012-2013 Section Committee
Diana Foley (NV), Chair
Judith Shaw (ME), Chair
NASAA members have a significant history of bringing
Keith Woodwell (UT), Vice
Keith Woodwell (UT), Vice
enforcement actions, including criminal prosecutions.
Chair
Chair
NASAA assists its members in coordinating enforcement
Kevin Anselm (AK)
Kevin Anselm (AK)
efforts regarding multi-state frauds by facilitating the sharing Joe Rotunda (TX)
Joe Rotunda (TX)
of information and leveraging the resources of states more
Gerald Rome (CO)
Abbe Tiger (NJ)
efficiently. NASAA's Enforcement Section acts as a point of Tom Atkinson (ON)
R. Scott Peacock (NS)
contact for federal agencies and self-regulatory organizations,
Rick Fleming (NASAA)
such as the SEC, the FBI, the Postal Inspectors, and FINRA,
and helps identify new fraud trends. The Section oversees the 2013-2014 Project Group Chairs 2012-2013 Project Group Chairs
activities of several Project Groups, including: Enforcement
Publications, Training, Internet Fraud Investigations, Oil/
T. Webster Brenner (MD)
T. Webster Brenner (MD)
Gas Ventures, Reg D Investigations, SID Database and
Enforcement Publications
Enforcement Publications
Enforcement Zones.
Tracy Meyers (SC)
Tracy Meyers (SC)
& Jeffrey Spill (NH)
& Jeffrey Spill (NH)
Enforcement Training
Enforcement Training
Jake van der Laan (NB)
Robert Moilanen (MN)
Internet Fraud Investigations
Internet Fraud Investigations
Chad Harlan (KY)
Gerald Rome (CO)
Oil/Gas Joint Offerings
Litigation Forum
Allan Russ (NC)
Chad Harlan (KY)
Reg D Investigations
Oil/Gas Ventures
Charles Kaiser (OK)
Allan Russ (NC)
& Rodney Griess (NE)
Reg D Investigations
SID Database
Charles Kaiser (OK)
Jeffrey Spill (NB)
& Rodney Griess (NE)
Enforcement Zones
SID Database
Jake van der Laan (NB)
Enforcement Zones
2012-2013 Enforcement Section Chair and current NASAA
Board Member Judith Shaw of Maine oversaw the section's
annual enforcement survey and the creation of the annual
listing of top investor threats.
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25
NASAA Activity | Sections
Investment Adviser
Overview
2013-2014 Section Committee
2012-2013 Section Committee
NASAA's Investment Adviser Section develops policies
Patricia Struck (WI), Chair
Andrea Seidt (OH), Chair
and monitors state registration and regulation of firms and
Linda Cena (MI), Vice Chair
Linda Cena (MI), Vice Chair
professionals in the investment advisory business. The Section Shonita Bossier (KY)
Shonita Bossier (MS)
also develops uniform policies for ethical business practices
Theodore Miles (DC)
Theodore Miles (DC)
and model rules to enforce the investment advisory provisions Ronak Patel (TX)
Ronak Patel (TX)
of state law. The Section oversees the activities of the Exams Susan Pawelek (ON)
Susan Pawelek (ON)
Advisory, Operations, Regulatory Policy and Review, Training, A. Valerie Mirko (NASAA)
A. Valerie Mirko (NASAA)
and Investment Adviser Zones project groups and works
closely with the CRD/IARD Steering Committee.
2013-2014 Project Group Chairs 2012-2013 Project Group Chairs
Sheila Cahill (NE)
Sheila Cahill (NE)
IA Exams Advisory
IA Exams Advisory
Michael Huggs (MS)
Michael Huggs (MS)
IA Operations
IA Operations
Gregory Abram (MA)
Gregory Abram (MA)
Regulatory Policy and Review
Regulatory Policy and Review
Clinton Edgar (TX)
William Carrigan (VT)
& David Swafford (CO)
& Maurice Kamhi (CA)
IA Training
IA Training
Oscar Gonzalez (TX)
David Swafford (CO)
IA Zones
IA Zones
Andrea Seidt of Ohio, 2012-2013 Investment Adviser
Section Chair and current NASAA President, questions
attorney Eugene Scalia during a panel discussion on cost-
benefit analysis at NASAA's Public Policy Conference in
Washington, DC.
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26
NASAA Activity | Sections
Investor Education
Overview
2013-2014 Section Committee
2012-2013 Section Committee
The Investor Education Section provides resources to help
Lynne Egan (MT), Chair
Daphne Smith (TN), Chair
increase awareness of frauds and to build sound financial
Diane Young-Spitzer (MA), Vice Marissa Rignanesi (NB), Vice
habits. Recognizing that education is a key weapon in the fight Chair
Chair
against investment fraud, the NASAA Investor Education
Marissa Rignanesi (NB)
Lynne Egan (MT)
Section was created in 1997 by the NASAA Board of
Bernice Geiger (NM)
Bernice Geiger (NM)
Directors to help support the financial education efforts of
Tina Kotsalos (PA)
Christina Kotsalos (PA)
the membership. The Section oversees the activities of four Jaime Brockway (NASAA)
Diane Young-Spitzer (MA)
Project Groups: Alerts & Advisories, Outreach, Promotion &
Jaime Brockway (NASAA)
Coordination, and Social Media & Online Outreach.
2013-2014 Project Group Chairs 2012-2013 Project Group Chairs
Diane Young-Spitzer (MA)
Diane Young-Spitzer (MA)
Alerts & Advisories
Alerts & Advisories
Bernice Geiger (NM)
Bernice Geiger (NM)
Investor Outreach
Investor Outreach
Marissa Rignanesi (NB)
Marissa Rignanesi (NB)
Online Outreach
Online Outreach &
& Social Media
Social Media
Barbara Bennett (NC)
Christina Kotsalos (PA)
Promotion & Coordination
Promotion & Coordination
Daphne Smith of Tennessee, 2012-2013
Investor Education Section Chair oversaw the
expansion of the section's Native American and
Conversation Starters outreach initiatives and
the development of investor alerts on energy
investments and private placements.
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27
NASAA Overview
The primary mission of NASAA is to represent and serve its members through advocacy,
education, subject-matter expertise, communication and coordination as they protect
investors from fraud and abuse. Through 2013 and into 2014, NASAA and its members worked
collaboratively to advance our common goal of providing a regulatory environment that works
efficiently for small businesses seeking to raise investment capital without sacrificing important
protections for investors.
Government Affairs
NASAA Testimony | 2013
Much of NASAA's government affairs agenda has focused
· The Federal Arbitration Act and Access to Justice:
on issues affecting NASAA members throughout the 113th
Will Recent Supreme Court Decisions Undermine
Congress.
the Rights of Consumers, Workers, and Small
Businesses?
These primary issues include:
· the preservation of state oversight in reviewing small
Mike Rothman, NASAA Board Member
business offerings under "Regulation A Plus";
Minnesota Commerce Commissioner
· improving the fairness of the securities arbitration
Senate Judiciary Committee hearing; written
process, including the introduction of legislation aimed at
statement for the record
prohibiting the use of mandatory pre-dispute securities
December 17, 2013
arbitration agreements by broker-dealers and investment
advisers;
· The JOBS Act at a Year and a Half: Assessing
· improving the examination frequency of federally-
Progress and Unmet Opportunities
registered investment advisers, including the introduction
of legislation intended to improve the examination
Rick Fleming, then NASAA Deputy General Counsel
frequency of federally registered investment advisers;
Senate Banking Subcommittee on Securities,
· establishment of a uniform fiduciary duty standard for
Investment and Insurance
broker-dealers and their agents; and
October 30, 2013
· monitoring and providing recommendations on recent
state legislative efforts to adopt state crowdfunding
· Legislation to Further Reduce Impediments to Capital
exemptions.
Formation
Other areas of activity include:
A. Heath Abshure, Past NASAA President
· Dodd-Frank Act and JOBS Act implementation;
Arkansas Securities Commissioner
· monitoring the development of various new capital
House Financial Services Subcommittee on Capital
formation proposals in the House of Representatives,
Markets and Government Sponsored Enterprises
sometimes collectively referred to as "JOBS Act 2.0";
October 23, 2013
· supporting full funding for the Securities and Exchange
Commission;
NASAA Deputy
Director of Policy
· opposition to unreasonably burdensome cost-benefit
Anya Coverman
analysis requirements;
discusses
· outreach regarding abuse of senior designations; and
mandatory pre-
· monitoring and providing recommendations on recent
dispute securities
arbitration during
federal and state legislative efforts to enact social media
a briefing for
privacy legislation with the potential to negatively impact
Congressional
investment adviser and broker dealer compliance.
staff.
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28
NASAA Overview
Sen. Jon Tester (D-MT), then-chair of the Senate Banking
Committee's Securities, Insurance, and Investment Subcommittee,
greets then-NASAA Deputy General Counsel Rick Fleming following his
In testimony before a House subcommittee, A.
testimony about NASAA's multi-state coordinated review program as
Heath Abshure, then-NASAA President, urges
NASAA Executive Director Russ Iuculano and Deputy Policy Director
Congress to take a `balanced approach' to
Anya Coverman look on.
legislative proposals to boost capital formation as
NASAA Policy Director Mike Canning looks on.
Legal & Regulatory Affairs
NASAA Legal Briefs | 2013
Throughout 2013, NASAA's legal department focused primarily
on providing expert commentary on JOBS Act and Dodd-Frank · FINRADepartmentofEnforcementv.Charles
Act implementation and other issues, including comment letters:
Schwab&Company,Inc.
· Favoring several proposed improvements to Regulation D,
Form D and rule 156;
NASAA's brief to the National Adjudicatory Council
· Supporting FINRA's efforts to eliminate duplicative
argues that a FINRA hearing panel erred by refusing to
NASD, FINRA and NYSE rules and guidance regarding
enforce FINRA rules prohibiting the use of class action
supervision, but advocating for stronger rules related to
waivers in customer agreements.
supervision of non-securities business lines;
May 8, 2013
· Supporting the extension of the fiduciary duty standard of
care to broker-dealers through a uniform fiduciary standard · StateofNewYorkv.Greenberg
of conduct no less stringent than that imposed in the
Investment Advisers Act of 1940;
NASAA's brief to the New York Court of Appeals
· Encouraging the SEC to use its Dodd-Frank authority to
argues that the New York Attorney General is not
prevent the use of class-action waivers by broker-dealers
preempted by NSMIA or SLUSA from pursuing an
and ban the use of mandatory pre-dispute arbitration
enforcement action that includes a claim for money
agreements; and
damages based on harms to investors.
· Urging the SEC to harmonize to the fullest extent possible
January 31, 2013
the federal and state requirements for Regulation A
offerings as called for by the JOBS Act.
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29
NASAA Overview
The NASAA department also devoted significant time and
effort toward developing and securing approval of NASAA's new
coordinated review of Regulation A offerings.
Other special initiatives included working with NASAA's
Investment Adviser Section on issues related to the "IA Switch,"
particularly in connection with exams and oversight. The Switch
concluded in 2013 with an order by the SEC deregistering
advisers no longer eligible to remain registered with the agency.
In anticipation of the conclusion of the Switch, the legal
department contributed to a comprehensive review of the Dodd-
Frank mandated initiative. The report was made available in May
2013.
A. Heath Abshure of Arkansas (left) moderates a panel
The department also continued to dedicate significant resources discussion on the importance of state oversight of small
in support of NASAA's efforts to design and build an electronic
offerings at the NASAA annual conference. Panelists include
filing system for Form D filings.
(from left): Manning Warren of the University of Louisville
In addition, two members of the legal
Brandeis School of Law; Faith Anderson of the Washington
Securities Division; and Mike Liles, attorney with Karr Tuttle
department continued to support David
Campbell.
Massey of North Carolina in his role as
NASAA's principal to the Financial
Stability Oversight Council.
In March, NASAA held
a news conference
at the National Press
Club to unveil the 2013
Legislative Agenda.
The event featured
then-NASAA President
A. Heath Abshure and
then-President-elect
Steven Irwin (right) of
Communications
Pennsylvania.
& Investor Education
New publications from NASAA include the
NASAA's Communications program continues to strive to
updated "Cutting Through the Confusion"
position NASAA and its members as a credible source of
brochure, a joint publication with the
information and as a leading voice of investor protection
Investment Advisers Association and others;
and an investor alert on energy investments
through balanced regulation.
by NASAA's Alerts & Advisories project
The majority of the communication department's work during
group.
2013 has focused on aggressively advocating NASAA's policy
positions regarding arbitration and various aspects of the JOBS
Act, with an emphasis on crowdfunding, Regulation D general
solicitation, and Regulation A small offerings provisions.
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30
NASAA Overview
Training & Technology
NASAA continues efforts to enhance the use of technology to
provide resources for its membership. Throughout 2013, NASAA
staff worked with the membership to enhance user knowledge
of the functions and benefits of NASAA's new Electronic
Examination Modules (NEMO) software application. This
software enables examiners
to conduct broker-dealer
and investment adviser
examinations in a secure,
Rep. Jim Himes (D-CT)
Then-SEC Commissioner Elisse
digital environment.
addressing the Public
Walter speaking at the Public
Policy Conference.
Policy Conference.
NASAA also offers a
high level of training to
help keep its membership current on the latest developments
in securities regulation and financial industry practices. In
2013, NASAA conducted training seminars in Pittsburgh,
Pennsylvania, covering issues related to broker-dealers,
investment advisers, enforcement, and corporation finance.
In addition, NASAA continued to enhance its distance
education program to enable members to access NASAA training
on demand.
North Carolina Deputy Securities
Administrator David Massey (left) with
Maureen Jensen, Executive Director of the David Wright,
Ontario Securities Commission, and then- Secretary General
Conferences & Events
Senate Counsel Tyler Gellasch discuss the of the International
market environment for investors at the
Organization
Public Policy Conference.
of Securities
NASAA hosted two major conferences in 2013, bringing
Commissioners,
together the membership, other regulators, industry
stresses the benefits
of international
representatives, policymakers, academics and the media to explore
collaboration.
the latest developments in securities regulation and industry
practices.
The NASAA membership convened in Washington, D.C.,
in April for NASAA's Spring Conference and Public Policy
Conference. In October, the membership met at NASAA's
Annual Conference in Salt Lake City, Utah. Highlights of both
conferences are shown on this page. Make plans now to attend
At the Annual Conference, Maine Securities Administrator
NASAA's 2014 Annual Conference in Indianapolis, Indiana, in
Judith Shaw (left) moderates a panel examining the arbitration
system. Panelists include (from left) Douglas Brown, Manitoba
September 2014.
Securities Commission; Ira Hammerman, Securities Industry
and Financial Markets Association; Robert Banks, Banks Law
Office; Andrew Pincus, Mayer Brown; and Professor Barbara
Black, University of Cincinnati College of Law.
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31
NASAA Leadership
Board of Directors
2013-2014
2012-2013
Andrea Seidt, Ohio, President
A. Heath Abshure, Arkansas, President
William Beatty, Washington, President-Elect
Steve Irwin, Pennsylvania, President-Elect
A. Heath Abshure, Arkansas, Past President
Jack E. Herstein, Past-President
Melanie Senter Lubin, Maryland, Treasurer
Chris Naylor, Indiana, Secretary
Judith Shaw, Maine, Secretary
Fred J. Joseph, Colorado, Treasurer
Joseph Borg, Alabama
Douglas Brown, Manitoba
Michael Rothman, Minnesota
Melanie Senter Lubin, Maryland
Douglas Brown, Manitoba (through April 2014)
John Morgan, Texas
Kathryn Daniels, Ontario (from April 2014)
Patricia Struck, Wisconsin
Daphne Smith, Tennessee
Heath Abshure completes his term as
NASAA President by handing the gavel
to Andrea Seidt of Ohio.
Board Committees
2013-2014 Board Committee Chairs
2012-2013 Board Committee Chairs
Awards
Awards
Craig Goettsch, Iowa
Craig Goettsch, Iowa
CRD/IARD Steering
CRD/IARD Steering
Melanie Senter Lubin, Maryland
Melanie Senter Lubin, Maryland
CRD/IARD Forms and Process
CRD/IARD Forms and Process
Anne Followell, Ohio
Pam Epting, Florida
Electronic Filing Depository
Electronic Filing Depository
William Beatty, Washington
Jack E. Herstein, Nebraska
Federal Legislation
Federal Legislation
A. Heath Abshure, Arkansas
Steve Irwin, Pennsylvania
Finance and Audit
Finance and Audit
Vacant
Patricia McKenna, Maryland
International
International
Kevin Hoyt, New Brunswick
Joseph Borg, Alabama
Legal Services
Legal Services
Judith Shaw, Maine
Chris Naylor, Indiana
NEMO Training and Support
NEMO Training and Support
Michael Huggs, Mississippi
Michael Huggs, Mississippi
Standardized Training and Technology
Standardized Training and Technology
Rick Hancox, New Brunswick
Rick Hancox, New Brunswick
Uniform Securities Act
Uniform Securities Act
Craig Goettsch, Iowa
Craig Goettsch, Iowa
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32
NASAA Awards
Outstanding Service Award
Blue Sky Cube
Linda Cena, Michigan
Matt Kitzi, Missouri
A. Heath Abshure
Marc Minor, New York
Jim Mumford, Iowa
Arkansas
Vincent Russo, Georgia
Daniel Tanaka, New Mexico
Steven D. Irwin
Tanya Weber, Mississippi
Pennsylvania
The Blue Sky Cube, NASAA's highest honor, recognizes
Distinguished Service Award
career achievement and distinguished contributions
Jake van der Laan, New Brunswick
to securities regulation. It is named for Blue Sky Law,
the umbrella term for state laws throughout the United
States that regulate the offering and sale of securities.
Lifetime Achievement Award
Kansas enacted the first Blue Sky Law in 1911 to
Robert Lam, Pennsylvania
protect investors from speculative schemes that, in the
words of a judge of the period, had no more substance
than so many feet of "blue sky."
NASAA President Heath Abshure (right) presents the Blue Sky
Former NASAA President David Massey (left) presents the
Cube to Pennsylvania Banking and Securities Commissioner
Lifetime Achievement Award to retired Pennsylvania Securities
Steven Irwin at NASAA's annual conference in Salt Lake City.
Commissioner Robert Lam.
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NASAA Staff
The daily operations of the association are managed by an executive director and a professional staff located in Washington, D.C.
NASAA departments include legal, finance, government affairs, communications, investor education, and membership services.
Executive Director
Communications & Investor Education
Bob Webster
Jaime Brockway
Russ Iuculano
Director
Communications &
Executive Director
of Communications
Investor Education Manager
Finance & Operations
Legal
Mark McLaughlin
Jason Wolf
Kaprina Robinson
Director of Finance
Joseph Brady
A. Valerie Mirko
Training &
Membership Services
& Operations
General Counsel
Deputy General Counsel
Technology Manager & Finance Manager
Conferences & Events
Christopher Staley
Faye Gordon
Counsel
Paralegal
Lonnie Martin
Danielle North
Membership &
Membership &
Government Affairs
Meetings Manager
Meetings Assistant
Administrative Office
Michael Canning Anya Coverman
Zachary Israel
Jennifer Marsoni
Josephine Oundo
Director
Deputy Director Government Affairs
Executive Assistant
Receptionist
of Policy
of Policy
Assistant
Office Manager
Benefits Coordinator
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North American Securities Administrators Association
750 First Street NE, Suite 1140
Washington, D.C. 20002
(202) 737-0900
www.nasaa.org
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