All Articles Finance Understanding new regulatory policies at the state level

Understanding new regulatory policies at the state level

Working with state regulators

3 min read


NASAA panel at IPAVision


Leaders from the North American Securities Administration Association joined an IPAVision panel to discuss critical state regulations and guidelines that are affecting IPA members. Moderated by Wally Kunzman, president and shareholder at Kunzman & Bollinger, panelists discussed proposed concentration limits, e-signature status and fees.


One of the biggest issues was the proposed concentration limits that would cap an investor’s holdings to no more than 10% of their liquid net worth in a REIT or its affiliates. The IPA has filed a comment letter stating that “sufficient safeguards are in place at the federal, state, and broker-dealer levels to minimize the risk of investor harm and provide adequate recourse,” making the limits unnecessary.


The proposal is still in the comment phase, with NASAA receiving feedback that spans from “no limits” to “these products aren’t appropriate for investors”, said Mark Heuerman, registration chief counsel, division of securities, NASAA. The term affiliates will also be broadly defined in the guidelines, another issue that has received many responses, he said.


“Ultimately these products are sold to retail investors and part of our job is to anticipate harm and take steps to mitigate it before it occurs,” said Anya Coverman, deputy director of policy and associate general counsel at NASAA.


She also pointed out that the rules are still in proposal stage and subject to comment from members and those in the industry. The process to move forward could take various ways forward as NASAA reviews the comment letters, including more public forums.


During a presentation after the discussion, Martin Dozier, counsel at Alston & Bird, LLC, outlined the current proposal, the IPA’s response and encouraged members to read the letter and take action.


The IPA is encouraging all industry participants to take action by sending a comment letter to their state NASAA officials.


Dozier reminded attendees that the proposal can either be adopted as written, revised or abandoned. Both NASAA representatives agreed that there were good comments in the letters and they were evaluating those.


In terms of the proposed e-signature policy, which IPA supports, NASAA has revised its original guidelines after an initial comment period and the modified policy is now in public comment period, which ends November 2.


Another important issue is the rising cost of regulatory compliance, which can increase cost of capital. Heuerman pointed out that state regulator expenses should already be counted as part of these costs along with accounting, broker-dealer expenses and other fees.


“I believe we perform a valuable service in reviewing offerings,” he said. “All offering circulars have a cover page and boilerplate, so if we were out of the picture completely, you’d still have those fees.”  


The panel also touched on suitability guidelines and portfolio construction. The main takeaway was that regulators are aware that costs are rising as regulations increase and are working to try and standardize as much as possible. Having an open dialogue and collaboration across the industry will be critical going forward as many of these proposals are finalized.