Spending almost his entire career as a state securities regulator, William Beatty will now lead his professional colleagues in the United States, Canada and Mexico for the next year.
On Tuesday, Mr. Beatty became president of the North American Securities Administrators Association at the organization's annual conference in Indianapolis. The next day marked his 28th year in the Washington State Securities Division, where he has served as director for the last five years.
Mr. Beatty, 55, takes the NASAA reins at a time when the organization has recently launched a
committee on diminished capacity and senior financial abuse, a
working group on brokerage fee disclosure and an effort to better monitor cybersecurity practices of investment advisers.
In Indianapolis, state regulators also said they would put an
emphasis on reform of the expungement process that allows brokers to clear disciplinary actions from their records on the Financial Industry and Regulatory Authority Inc. website.
A personal challenge for Mr. Beatty over the next year will be to head NASAA, based in Washington, D.C., from the “other” Washington. It likely will require many early morning conference calls and a fair amount of cross-country travel for Mr. Beatty, who is married with three children.
It wasn't hard to find Mr. Beatty at the NASAA conference — at 6'4”, he towered over most other participants — and at the end of the public portion of the event, he sat down with InvestmentNews to talk about his goals.
InvestmentNews: What is your priority for the next year?
Mr. Beatty: Our main focus is going to be on senior [investor abuse] issues. We need to make some headway there. This is tremendously important to us. These are the people we see in our offices. Roughly a third of victims in securities cases are seniors. It's not hard to imagine why. They're the ones who have accumulated money their entire life, so they have the money to invest. There's a calculation on the part of people who wish to harm them that they may not be at their best or, given the generation they grew up in, they may be more trusting.
InvestmentNews: What can NASAA do to help senior investors?
Mr. Beatty: Education is a key. The other thing NASAA can do is perhaps come up with ways, working with industry, to deal with situations where some type of abuse or impairment is suspected and [outline] what can the broker-dealer, the investment adviser, etc., do about it. We can … help come up with some best practices, model rules, some type of system that would allow a cooling-off period [after a senior makes an unusual financial decision], whatever you want to call it.
InvestmentNews: What about ongoing issues involving reform of the arbitration and expungement process?
Mr. Beatty: One of the things we'd like to talk about with Finra is [whether expungement] is something that should be the arbitrators' call. Or is it something that should be separated from the arbitration process and have it remain a regulatory matter. Other than that idea, I don't think we know, if we went that route, exactly what it would look like yet.
InvestmentNews: What kind of relationship does NASAA have with Finra?
Mr. Beatty: We've developed a pretty good working relationship with Finra on a variety of issues. We have come a long way together in terms of learning how to communicate and work together. We have regular liaison meetings. Those have borne fruit in terms of being able to understand each other better.
InvestmentNews: What would you like to see happen with broker fee disclosure?
Mr. Beatty: There is progress to be made in … fee disclosure. What I hope to see is [developing] some type of best practices or something like that in terms of having fee disclosure that investors should be able to find and understand.
InvestmentNews: What about cybersecurity?
Mr. Beatty: We released the survey template to all the states. They can take some of the questions in the survey and build it into their exam modules. If we have an opportunity to collect more data, we'll know a little more about what the issues might be. I'd like to see a broader awareness of the issue.
InvestmentNews: NASAA also is in the process of updating its guidelines for sales of real estate investment trusts. What is your goal with that initiative?
Mr. Beatty: The thing that's the highest priority is coming up with some type of uniform [client net worth] concentration limit that all states can apply. If you open the cover page of a lot of REIT prospectuses, there's a list of states [with different] concentration limits. [REITs] are perfectly legitimate products for the right person. Our concern is ... you see the interest rate, and the conversation kind of ends after that, no matter how much disclosure someone puts in front of [investors]. It's a natural reaction. That's why it's important people understand that the initial distributions they're getting are retentions of capital because the REIT has not gotten fully operational yet. It's not throwing off income.
InvestmentNews: What is the deadline for the REIT guideline review?
Mr. Beatty: We'll have pretty significant momentum on it by the end of the year. I don't know that it will be done by then.
