NASAA president calls on Congress to prevent advisers, brokers from putting their interests ahead of clients'

Michael Pieciak details four ways lawmakers can empower investors in 2019, including banning mandatory arbitration

Apr 2, 2019 @ 12:45 pm

By Michael S. Pieciak

Main Street investors are an engine of prosperity that drives our nation forward, and when we empower them by putting their interests first, our capital markets, our economy and our country all win.

A team approach is necessary to best safeguard the financial futures of hardworking Americans, and foster capital formation for local businesses and entrepreneurs and Congress plays a key role. Given investment advisers' central function of guiding investors, and their position as constituents of lawmakers, they too can influence the direction of any policies to come by supporting legislation that puts investor interests first.

What is the roadmap to better investor protection, and on what issues should our leaders in Washington be focused?

State securities regulators, like my fellow members of the North American Securities Administrators Association, have a unique view here. Our position as the closest regulators to the public provides a window into the concerns of Main Street investors and small businesses, which enables us to make specific policy recommendations to help them both.

First, Congress can prioritize Main Street interests by strengthening investor protection and encouraging greater participation in our capital markets. One simple way to accomplish this goal is by preventing investment advisers and stockbrokers from putting their interests ahead of their clients'. Congress should exercise its oversight to ensure the Securities and Exchange Commission's Regulation Best Interest rulemaking requires this standard of conduct for financial professionals — and that any final rule is implemented quickly and fully.

Second, Congress must strengthen the ability of state regulators to police our capital markets to ensure their integrity. This is an area where regulators can — and must — be the first line of defense. But regulators can only be successful if they have the resources and tools necessary to prevent and deter fraud and other forms of misconduct. Investor trust in the markets hinges on strong and effective regulators empowered to root out wrongdoing.

Third, Congress should take a comprehensive look at recently enacted laws and rules designed to expand the private and quasi-private securities markets. In particular, Congress members should study the impact of the JOBS Act and similar laws that have been implemented since the Great Recession. Policymakers have a duty to ensure these various initiatives are working effectively together and equitably serving all investors and issuers.

Finally, Congress must affirm investor rights in the modern securities marketplace by banning the use of pre-dispute mandatory arbitration clauses in investor contacts and working to reduce unpaid awards from disputes between investors and securities firms. Remarkably, Financial Industry Regulatory Authority Inc. data indicate that in recent years more than one in four arbitration awards goes unpaid, making it clear that more work is needed on this issue. In a recent NASAA survey of investors, 58% said they would support congressional action to reduce or eliminate unpaid arbitration awards.

(More: 10 millennials making their mark in Washington — and beyond)

These are just a few of the steps Congress can take to put the interests of Main Street investors first. Our agenda for the 116th Congress offers a series of policy recommendations, from intergenerational issues affecting millennial and senior investors, to promoting shareholder rights, to privacy and cybersecurity related to financial technology innovations.

We look forward to engaging with Congress to find solutions on these key issues, protecting Main Street investors in the process and helping to make sure our capital markets remain the world's most secure, transparent and successful.

Michael S. Pieciak is president of the North American Securities Administrators Association and commissioner of the Vermont Department of Financial Regulation.


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