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Securities regulation in the United States started with state laws known as Blue Sky Laws, the first one enacted in Kansas in 1911. Arkansas enacted its first such law in 1913. Administration of that law was initially put under the Insurance Commissioner but almost immediately moved to the Bank Commissioner. Securities regulation remained under the auspices of the Bank Commissioner until the passage of Act 254 of 1959, the Arkansas Securities Act, which still governs securities regulation in the twenty-first century. The act created the position of Securities Commissioner as the head of the Securities Division of the State Bank Department, who reported to the Bank Commissioner. In 1973, the Arkansas General Assembly removed the Securities Division from the Bank Department, renamed it the Arkansas Securities Department (ASD), and removed the commissioner from the supervision of the Bank Commissioner. Since then, the commissioner is appointed by and serves at the pleasure of the governor.
Securities regulation can be seen as early consumer protection legislation. Its primary goal is the protection of investors, which includes ensuring that securities and financial markets function efficiently and without unnecessary regulatory impediments. The basic rules are simple: to offer or sell securities in Arkansas, the securities must be registered with the ASD or exempt from registration under some provision of state or federal law; and the people offering or selling the securities or who provide investment advice must also be registered with the ASD or be exempt from registration. Registration of securities is usually done across multiple jurisdictions virtually simultaneously by electronic means. The registration statements, which can include a great deal of information about the entity issuing the securities, are open to the public. Registration of entities and persons offering or selling securities or offering investment advice is also done electronically across multiple jurisdictions, and much of that information is also available to the public.
The ASD is charged primarily with implementing and overseeing the act but also administers the Arkansas Fair Mortgage Lending Act, the Arkansas Money Services Act, the Arkansas Savings and Loan Act, and the Arkansas Credit Union Act. The ASD regulates the sale of securities, as well as securities brokerage firms and their agents, state-registered investment advisers and their representatives, mortgage loan companies and their loan officers, money services companies, state-chartered credit unions, and savings and loan companies. Administration of these acts includes registration, licensing, compliance, investigation of consumer complaints, and consumer education.
Every state has a securities regulatory agency. At first glance, this would seem like a patchwork system of regulation, especially in light of the fact that the federal government also regulates securities through the United States Securities and Exchange Commission (SEC), and the fact that there is a national self-regulatory organization for brokerage firms, the Financial Industry Regulatory Authority (FINRA). However, securities regulation legislation of the states is fairly uniform. The chief federal act, the Securities Act of 1933, was patterned after the state laws that had been enacted since 1911, and most of the present state acts, including the Arkansas act, were uniform acts patterned after the 1933 federal act. There is much collaboration and cooperation among the state regulatory agencies and the SEC.
Of great concern to the ASD is protecting investors from securities fraud. Although it is committed in many ways, this type of fraud is defined identically in state and federal law and is basically the misstatement of material fact or the omission of a material fact made in connection with the offer or sale of a security.
The ASD undertakes administrative enforcement actions for registration violations and securities fraud through actions initiated by the ASD staff and orders issued by the commissioner. These actions may include denials, suspensions, and revocations of registrations or licenses, as well as orders to cease and desist offering and selling certain securities or engaging in fraudulent activity. The staff and commissioner may also pursue actions involving violations of the act in circuit court when it is appropriate, including seeking fines and reimbursement of funds to investors. When violations of the act are criminal, cases are referred to state and federal authorities for prosecution.
For additional information:Arkansas Securities Department. http://www.securities.arkansas.gov (accessed January 3, 2017).
Theodore Holder Arkansas Securities Department
Last Updated 1/13/2017
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