| SALT LAKE CITY, Utah, Oct. 8
SALT LAKE CITY, Utah, Oct. 8 The newest head of
a U.S. state securities regulators' organization wants to make
it easier for small companies to issue state-registered
securities at a time when her group has raised concerns about
some other aspects of the process.
Andrea Seidt, who was elected president of the North
American Securities Administrators Association (NASAA) this
week, called on Tuesday for the states to create a centralized,
automated system for securities that typically have to be filed
manually and separately in each state.
The move would spare companies from having to file redundant
paperwork with multiple state regulators. Such a streamlined
approach would encourage more issuers to subject their
securities to state review, because it would be less burdensome
than it is now, said Seidt. If that happens, it would bolster
investor protections, she said in prepared remarks during a
luncheon at NASAA's annual meeting in Salt Lake City, Utah.
Seidt's proposal, an olive branch, of sorts, to small
businesses, comes in the wake of NASAA's recent fight against a
2012 federal law that will make it easier for small businesses
to raise capital through "crowdfunding," a strategy that lets
investors buy small stakes in ventures through various websites.
NASAA has said that crowdfunding could attract fraudsters
who will bilk investors. Small businesses and advocates for
start-up companies, however, have criticized NASAA for trying to
make raising capital more difficult.
The group has also raised concerns about a companion measure
approved by the U.S. Securities and Exchange Commission in June
that lifts an 80-year-old ban on advertising of private
securities offerings by hedge funds and start-up companies
While private offerings are typically limited to investors
who meet certain income and net-worth thresholds, advertising
could increase the chances that unscrupulous issuers will market
their offerings to investors who are not qualified to buy them,
NASAA officials have said in public statements and comment
NASAA members include regulators from U.S. territories,
Canadian provinces and Mexico, where different rules on some of
these issues may prevail.
PLAYING IT SAFE
Seidt envisions a system that would be similar to one that
state securities regulators now use to license and share
information about brokerages and investment advisers. She said
that state registration could convey a greater sense of safety
to investors and eventually encourage issuers to go this route.
Issuers can now use certain exemptions under federal law to
avoid state registration altogether. But many unregistered
offerings sold under the federal exemptions turn out to be
fraudulent, Seidt said.
"Shrewd investors and securities professionals will soon see
that state review generally yields safer opportunities for them
on the whole than opportunities floated in a market with little
or no review," said Seidt, who is also the Ohio Securities
Commissioner. "Over time, savvy businesses will seize upon this
in deciding whether or not to register their securities," she
Seidt's leadership of NASAA will last a year. It puts her a
long way from growing up in a in a rural Ohio community as the
daughter of a coal miner and stay-at-home mother. Seidt, 40,
holds a law degree from The Ohio State University and started
her legal career as a litigator for Jones Day, a global law
firm. She became Ohio Securities Commissioner in 2008.
NASAA, under Seidt's leadership, will continue to lobby in
favor of its longstanding concerns: securing more funding for
the SEC so it can more thoroughly police investment advisers and
ending mandatory arbitration for brokerage clients. State
regulators have long taken issue with the requirement that
brokerage customers sign contracts agreeing to resolve future
legal disputes with their firms through securities arbitration
instead of going to court, Seidt said.
Seidt's call to get a uniform state securities registration
system underway follows the completion of a major project by
U.S. state regulators during which they took on oversight for an
additional 2,100 "mid-sized" investment advisers who were
previously overseen by the SEC.
The Dodd-Frank financial reform law required these advisers,
who manage between $30 million and $100 million, to register
with states instead of the SEC.
"We've been tested in a lot of senses," Seidt said in an
interview. For Seidt's 38-person staff in Ohio, that meant
visiting 110 newly added advisory firms this year, most of which
had never been examined by the SEC, she said.
Seidt and other regulators had feared the possibility of
significant problems such as dishonest business practices or
other risks to investors at those firms. But the regulators were
pleasantly surprised, she said. "They're in better shape than we