NASAA Letter to the SEC Objecting to State Preemption of Regulation A+ Offerings

The leadership of the North American Securities Administrators Association (NASAA) has sent a letter to the SEC objecting to preemption of state authority over small corporate offerings through the SEC's proposed rule regarding Regulation A+.  The letter in part states the following:

State regulators have particular strengths that uniquely qualify them to effectively oversee Regulation A+ offerings.  Because we are geographically close and accessible to both investors and local businesses, we are often in a better  position than the Commission to communicate with them about the offering to prevent abuse and improve the overall quality of the deal for investor and business alike. . . .

Our proximity to investors also puts us in the best position to deal aggressively with securities law violations when they do occur. States are typically the first responders for investors robbed or cheated out of their investments.  We and our state peers fielded more than 10,000 investor complaints and conducted more than 5,800 investigations in the last reporting year. The most serious violations we uncovered were criminally prosecuted, resulting in 1,361 years of incarceration. More than $694 million of misappropriated or lost wealth was returned  to investors in state-issued restitution orders. Notably, many of these cases originated from federal exemptions that preempt state review. Regulation D offerings, for example, were the most common product or scheme reported by the states in 2013. It is the fourth consecutive year Regulation D deals have topped the state list.

We cannot do our job – protect investors or help small businesses access capital and grow their companies – where the Commission attempts to prohibit our review as contemplated in the Regulation A+ Proposal.