State regulators call for backup

IRVINE, Calif. — State regulators are seeking reinforcements. In a speech this month at the annual meeting of the National Conference of State Legislatures, Joseph Borg, president of the North American Securities Administrators Association Inc., called for the NCSL to develop a more detailed policy statement opposing federal pre-emption of state securities laws. Such a statement would “send a more direct message to the U.S. Congress and the federal financial service regulators” not to interfere with state regulators, he said in his speech. Both Washington-based NASAA and the NCSL, which is based in Denver and Washington, historically have fought attempts by Congress and federal regulators to pre-empt state laws and regulations. The NCSL is a bipartisan organization of state legislators and their staff members. It advocates for the interests of state governments before Congress and federal agencies. NASAA represents state and provincial regulators. The NCSL already opposes federal pre-emption of state securities laws and regulations, but Mr. Borg, who is also director of the Alabama Securities Commission in Montgomery, wants the group to adopt a policy statement specific to securities regulation. The NCSL has produced detailed policy statements regarding regulation of banks and insurance companies. An NCSL resolution would put state securities regulators “on par with the other [NCSL] resolutions,” Mr. Borg told InvestmentNews. “It could be effective to use at home [with state legislatures] and in case we need it for Congress.” A more detailed NCSL resolution “would be kind of a Good Housekeeping Seal of approval,” he added Christopher Coleman, NCSL legislative analyst, said the group plans to create a stand-alone policy for state securities regulation. NCSL’s policy statements for banking and insurance have aggressive language warning against federal interference. Its statement on banking, for example, says that federal pre-emption of state authorities should occur due only to a “national economic crisis” and that Congress, not federal banking regulators, should pre-empt actions of states. The state lawmakers’ group has urged Congress to “eliminate the judicial deference” given the Office of Comptroller of the Currency by federal courts to challenge state financial services laws. The NCSL has also asked Congress to “rein in OCC abuse of its regulatory authority to pre-empt state laws.” Echoing Eliot L. Spitzer, New York’s governor and its former attorney general, the NCSL’s policy statement on banking regulation says: “States need to be able to enforce both state and federal laws when a financial institution’s primary federal regulator is not protecting the citizens of the state.” Meanwhile, legislation was introduced in the House of Representatives last month to create a federal charter for insurance companies and national agencies. Barney Frank, D-Mass., who is chairman of the House Financial Services Committee, has indicated a willingness to consider an optional federal charter for the life insurance industry. A bill to create an optional federal insurance charter was introduced in the Senate during the last Congress.