Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/17/2018 09:00 AM JUDICIARY
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HB 170-AK SECURITIES ACT; PENALTIES; CRT. RULES 10:06:20 AM CHAIR COGHILL announced the consideration of HB 170. [SCS CSHB 170(L&C) was before the committee.] He noted who was available to answer questions. 10:07:29 AM REPRESENTATIVE SAM KITO III, Alaska State Legislature, Juneau, Alaska, Chair of the House Labor and Commerce Committee that sponsored HB 170, stated that the bill updates the Alaska Securities Act and provides the legal framework for selling securities in Alaska to Alaskans. It includes provisions for crowdfunding, registration of securities and sales force, enforcement actions for violating the Alaska Securities Act, and education. It ensures that Alaska is keeping up with the securities industry. 10:08:37 AM CHRYSTAL KOENEMAN, Staff, Representative Sam Kito III, Alaska State Legislature, Juneau, Alaska, stated that the current Alaska Securities Act has been in place since 1961. The Act is out of date and includes provisions for things like notification by telegraph. The bill also separates the securities statutes from the Alaska Native Claims Settlement Act and related statutes to facilitate a better understanding of each. It deters investment scams using Alaska entities or harming Alaskans. It helps protect older and vulnerable adults from financial exploitation and requires financial professionals to report suspected exploitation and gives them immunity. 10:10:26 AM KRISTY NAYLOR, Acting Director, Division of Banking and Securities, Department of Commerce, Community and Economic Development (DCCED), Anchorage, Alaska, stated that HB 170 is important to the operation of the division, to their regulation of securities in Alaska, and to Alaskan consumers. She noted th The bill updates the 1961 law to better align with current industry practices. Most importantly, it enhances the consumer protection and enforcement provisions in current law. HB 170 is about protecting consumers and effectively punishing bad actors who prey on Alaskans. The existing low administrative civil and criminal penalties are so insufficient they are not a deterrent but rather are seen by some as a cost of doing business. The bill solves this problem by increasing administrative civil and criminal penalties for those who harm Alaskans, especially vulnerable adults and seniors. Recent investigations of fraud have involved millions of dollars in losses yet current enforcement provisions allow a maximum penalty of just $25,000 per violation. The new law increases the penalty up to $100,000 per violation and more if the victim is a senior or vulnerable adult and allows the division to bar bad actors from the securities industry in Alaska. The division could order restitution for victims and brokers and advisors would be required to report suspected financial exploitation to both the Division of Banking and Securities and to Adult Protective Services. She cited examples of recent and ongoing cases to demonstrate the need for enhanced tools for enforcement, penalties, and consumer protections. 10:16:50 AM CHAIR COGHILL asked if the Alaska-specific provisions are readily identified. MS. NAYLOR said 80-90 percent of the bill is based on the Uniform Securities Act. The existing Alaska-specific provisions were retained, but since more were added they took that opportunity to rearrange the Act to make if more user friendly. 10:18:12 AM BRIAN PINKSTON, Owner, Bright Road Wealth Management, Anchorage, Alaska, stated that as a member of the securities industry he supports further regulation. He spends time every day helping clients work through things they bought and don't understand. It is important to have stronger criminal protections for seniors, especially those with diminished capacity. This is relevant for Alaska because Alzheimer cases in Alaska are expected to increase 54.9 percent by 2025. The Alzheimer's Association reports that Alaska is number one in the nation for seniors with Alzheimer's. 10:21:36 AM DAVID GOTTSTEIN, President and Chief Investment Officer, Dynamic Capital Management Inc., Anchorage, Alaska, said he was speaking in support of HB 170 and wanted to applaud the Banking and Securities Division for advancing the proposal. He said a large portion of the securities industry operates at the most modest fiduciary standard so it's important to have strong penalties in place to protect investors when those modest standards are broken. Every year big investment institutions are fined for their misconduct but the individuals who offered the poor advise aren't penalized. It's the shareholders that pay the penalties so it's important to have these tools in the toolbox for the banking and securities regulators to push back. MR. GOTTSTEIN said he was pleased that the bill keeps the existing exemptions that makes it easier for small businesses to start and raise capital. He also applauds the efforts to protect the elderly because this is a growing and important area. CHAIR COGHILL asked Ms. Naylor to be prepared to discuss the Alaska-specific provisions at the next hearing. 10:25:16 AM SENATOR COSTELLO highlighted that the previous division director, Kevin Anselm, worked very hard on this bill. She said she considers it the unsung hero of the session. It's been through the process before but there are compelling reasons for giving it a thorough vetting. 10:26:08 AM CHAIR COGHILL held HB 170 in committee for future consideration.