All years tend to be busy years for the North American Securities Administrators Association, according to Maryland Securities Commissioner Melanie Senter Lubin, who began her year-long term as the organization’s president this past September.
But 2022 looks to be particularly eventful as Lubin said she expects forward momentum on a number of NASAA’s priorities, from reducing the frequency of expungements on brokers’ records to helping senior clients who may be victims of fraud.
In the coming year, Lubin expects states to consider adopting several NASAA recommendations, including one supporting whistleblowers as well as a “restitution assistance” act to create a fund to help securities violations victims recoup some of their losses.
Expungement remains top of mind for Lubin, who argued that removing information from the Central Registration Depository and BrokerCheck should only be an “extraordinary remedy” to extraordinary circumstances and done infrequently. She thinks it currently happens too often, leaving potentially necessary information lost to regulators, firms and investors. Lubin hopes collaborating with the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) could bring a resolution.
“Working together, we see more progress being made and more interest in trying to tighten things up, because we’ve become very concerned by the amount of information being removed from the system,” she said.
NASAA also proposed a model rule to make it easier to pursue and penalize registrants that haven’t paid mandated arbitration awards, coming in the wake of a report by the Public Investors Advocate Bar Association indicating that about three in 10 of FINRA’s 2020 public arbitration awards went unpaid. While FINRA can suspend a respondent for not paying, they can still register with state regulators and continue working in the industry.
Lubin said NASAA will continue to work to reduce senior fraud in the coming year, noting the rise of “romance” scams or other cons taking advantage of people’s isolation in the pandemic. According to Lubin, about 30 states adopted recent NASAA provisions encouraging brokers to reach out if they think a client has been victimized.
“They’re really awful scams because they take advantage of people’s emotions, and take advantage of the fact that frequently these are elderly widows or widowers, and they don’t have companionship,” she said.
Lubin said she was concerned about the frequency of self-directed individual retirement account (IRA) scams, which increased last year, according to recent NASAA data. Lubin stressed that self-directed IRAs were not inherently a problem, but con artists might see them as a vehicle for tricking victims, as many investors have heard of IRAs.
“The more the pitch sticks with what sounds good to people and what people are familiar with, the easier it is to run the scam,” she said.
Lubin’s commitment to her work partially sprang from a senior fraud incident she encountered early in her career. After retiring from a steel company, an elderly man lost much of his life savings to a con artist, leaving him little means to support himself or his wife. Lubin, not yet an attorney, was assigned to interview the couple and was rocked by their sadness. The ugliness of the injustice galvanized her.
“The con artists are really good at what they do. They manipulate (victims) into giving up their money,” she said. “It’s kept me going for a long time.”
