Wednesday, September 16, 2009

NASAA Power Grab With a Punch

As referenced earlier today the NASAA is pushing hard to regain its power and authority over the financial industry, and isn't being shy about it. We wrote eabout their push to increase the ceiling for state registered investment advisers from $25 million to $100 million, which will put financial regulation back at least a decade.

In another story today, the NASAA actually took a shot at its fellow regulators. The incoming NASAA president is quoted as saying, referring to the current financial collapse - "While this catastrophe was the result of many failures, I am very proud to say that a failure of state securities regulation was not one of them. In the last few years, it has been state and provincial securities regulators who have been at the forefront of investor protection. Our record demonstrates clearly that we have the will and ability to regulate."

While it is nice to pat yourself on the back, stepping on your fallen colleagues to gain an advantage is not the way most folks do business. Particularly when the pats on the back are not deserved.

While no one would claim that the state regulators were responsible for the financial crisis, they certainly missed some important parts of that collapse. Lets not forget that most, if not all of the state regulators who comprise the NASAA had regulatory authority over Madoff, Lehman, Bear Stearns and Merrill Lynch. Each had the ability, and dare I say some had the obligation, to review the books and records of each of those firms.

I am not suggesting that they should have conducted full audits of the firms, heck I will even give them a pass on missing all of these issues that were under their jurisdiction. Let's face it, they simply do not have the funds or staff to meet their obligations. But they do have the statutory authority, to oversee brokerage firms that are operating in their states. It is therefore disingenuous for their president to now say "everyone else missed the boat, we didn't and we could do it better."

We spent years attempting to consolidate the regulatory nightmare that is known as securities regulation. Giving new powers, and new jurisdiction to 50 regulators is not the way out of the financial crisis - unless of course the plan is to put the brokerage firms and investment advisory firms out of business under a bureaucratic nightmare of duplicative filings, fees, audits, examinations and enforcement proceedings.

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