As Alabama’s securities regulator, our office is charged with protecting investors in Alabama from fraud and abuse in the offer and sale of investments, including stocks, bonds and mutual funds and prosecuting financial frauds, including Ponzi, pyramid, prime bank and other scams.

This vital law enforcement function is an essential part of what state securities regulators across America do and have done for more than 100 years. Unfortunately, this important investor protection authority is under attack by a small group in Congress. 

The goal of state securities laws is to keep the bad guys from ripping off investors, and that authority has served investors well. Thanks to the efforts of state securities regulators from our office alone, hundreds of millions of dollars have been returned to hardworking Alabamians and many fraudsters have been sent to jail for their misconduct. These efforts have helped to keep the markets clean so legitimate companies have a shot at growing their businesses.

A bill under consideration by the Financial Services Committee of the U.S. House of Representatives (H.R. 5037), The Securities Fraud Act of 2018, would tie the hands of state regulators in a way that would expose everyday investors on Main Street to more financial fraud and abuse. If the bill becomes law, my office would be prohibited from taking on certain types of cases, and investors who have lost money in these cases due to fraud would instead have to solely depend on the federal government to pursue the wrongdoers. That just won’t work for Alabamians.

“Mom and pop” investors with small-dollar losses would be exposed to more and more fraudulent activity as state regulators are forced to prioritize these cases while federal regulators generally require significant losses involving many investors. Our office has always prided itself on listening to every Alabamian that comes in our door with a complaint and we want to keep it that way!

The member of Congress from New Jersey, who wrote H.R. 5037, claims state anti-fraud laws (that means our office going after those who rip off Alabama investors) somehow deters companies from raising money in U.S. securities markets. They overlook the obvious point of such laws — the prevention of fraud — and instead point to the decline in initial public offerings (IPOs) conducted in the U.S. markets over the past few years. They then argue that state efforts to hold wrongdoers accountable are somehow responsible for those low numbers. A look at the facts tells a very different story.

The introduction of H.R. 5037 represents a serious threat to investor protection and I hope the rest of the members of Congress see this legislation for what it is — an attempt by those suspected of wrongdoing to make it easier to get away with their misconduct. This bill is bad for our Alabama investors, bad for our markets and bad for our small businesses. I urge our congressional leaders to reject H.R. 5037.

Joseph Borg, Director
Alabama Securities Commission