North American Securities Administrators Association (NASAA)
The oldest investor protection organization in the US
What is the North American Securities Administrators Association (NASAA)?
The North American Securities Administrators Association (NASAA) is the oldest investor protection organization in the US, coming into existence more than a century ago in 1919. NASAA’s membership comprises 67 administrators from all states of the United States, territories, and districts.
The administrators are tasked with the responsibility of protecting investors who purchase securities or seek investment advice, and its mandate extends to the various security issuers and intermediaries who sell and offer securities for sale to the public.
NASAA members participate in enforcement actions to protect investors from investment fraud by investigating violations of state and federal laws that relate to investor protection. The association also coordinates training programs, workshops, and seminars for its security agency staff in the states, districts, provinces, and US territories.
Purpose of the North American Securities Administrators Association
The main purpose of the North American Securities Administrators Association is to help investors detect and prevent investment fraud in securities trading. The organization acts as an advocate for investors who lack the experience or expertise to protect their interests from security firms and investment advisors.
NASAA achieves its objectives by investigating violations of investment laws at the state and provincial levels through its members. The group’s membership comprises security regulators from across North America who are part of a complementary regulatory system that runs from the state/provincial level to the federal level.
The organization also promotes investor education by organizing training and seminars where investors are equipped with knowledge on safe trading, investment fraud, cybercrime, and tools that they need to use to make informed financial decisions.
NASAA is also responsible for licensing stockbrokers and investment advisors who manage less than $100 million in assets. It also licenses security firms that operate at the state level, as well as registering certain security offerings.
Apart from licensing stockbrokers, NASAA also creates securities exams such as Series 63, Series 65, and Series 66 that agents must pass before they are allowed to sell securities at the state level. It is responsible for reviewing security offerings of small businesses and offers guidance to such firms on how to raise funds from the public while ensuring compliance with state security laws.
NASAA cooperates with other organizations such as NASDAQ, the Securities Exchange Commission (SEC), FINRA, New York Stock Exchange (NYSE), and other organizations to enforce compliance with security regulations and promote investor protection.
Key Activities of NASAA
NASAA is responsible for performing the following functions to protect investors:
1. Licensing stockbrokers
NASAA is responsible for registering and licensing broker-dealers, investment advisor firms, and security firms that conduct business at the state, district, province, or US territories level.
2. Investigating investor complaints
As the organization charged with investor protection, NASAA is responsible for investigating investors’ complaints on security offerings and potential cases of financial fraud. Its membership comprises regulators that work under the jurisdiction of the state’s attorney general, and are, therefore, well equipped to investigate the complaints.
3. Enforcing securities laws
NASAA membership is authorized to fine, penalize, and provide restitution to aggrieved investors.
4. Promoting investor education
NASAA offers training to investors to equip them with knowledge on essential tools to evaluate securities, identify and prevent fraud, and their rights as consumers of security offerings.
5. Reviewing brokerage and investment advisor firms
NASAA routinely examines licensed brokerage and investment advisor firms to ensure compliance with security laws. It also audits branch offices of the firms to examine their sales practices and maintenance of accurate records of client accounts.
6. Advocating for strong state securities laws
NASAA is responsible for championing strong and consistent state laws and regulations that safeguard investor interests. In line with the responsibility, the organization advocates for pro-investor policies through congressional testimonies and comment letters.
The NASAA Model Cybersecurity Rule
The NASAA membership voted to adopt a model cybersecurity rule package in May 2019. The model dictates how investment advisor firms collect and utilize personal data of their clients and provides guidelines on how the firms should design their cybersecurity procedures and privacy practices. However, the model rule package needs to be adopted by the individual states, districts, provinces, and territories to become law under that jurisdiction.
The model rule comprises three key components. The first component makes it mandatory for investment advisor firms to implement information procedures and practices that protect client data. The investment firms are required to provide, upon the initial engagement with a client and then annually, a privacy policy on how it collects and shares private personal information.
The second component is an amendment to the existing NASAA model recordkeeping framework that requires the firm to maintain records of their compliance with the policy.
The third and final component is an amendment that renders failure to establish, maintain, and enforce the model privacy policy a violation of the NASAA model rule on unethical business practices.
More Resources
CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:
