State securities regulators have generally been more aggressive in protecting investors than FINRA or the SEC. These enforcement tactics by some state agencies have even caused broker friendly legislators at the federal level to call for the elimination of all state securities regulations. They are not stupid. They know that they can, with the power of the purse, control federal regulators and industry controlled self-regulatory organizations.
State regulators formed a trade association, the North American Securities Administrators Association (NASAA). In 1997 NASAA adopted an “Investor Bill of Rights” reminding investors of their rights and of the obligations broker dealers have to investors. The Investor Bill of Rights offers advice and describes 10 specific areas in which investors are entitled to protection. The first of the 10 rights is set out below with comments on how it can most effectively be applied to maximize protection to investors:
1. Ask for, and receive, information from a firm about the work history and background of the person handling your account, as well as information about the firm itself.
Comment: Some securities firms and many individual brokers are reluctant to provide this information. Investors should demand it. An investor can seek information from FINRA and from state regulatory bodies. Mysteriously, FINRA records are often not current and are notoriously incomplete. For the latest and most thorough information, always contact state regulators. If there is resistance by the broker-dealer to providing any information you want, then you are best advised to move on.
The additional investor rights will be posted on this space in future articles.
To learn more about Dale Ledbetter, visit his website at www.dlsecuritieslaw.com.