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September 24, 2019 at 12:00 PM
New Jersey Bureau of Securities Chief Christopher Gerold, who helped craft the state’s fiduciary rule, became president in mid-September of the North American Securities Administrators Association.
Gerold, who will serve a one-year term as NASAA’s president, assumes his new role as the Securities and Exchange Commission’s Regulation Best Interest comes under legal attack. Two separate lawsuits were filed in the Southern District of New York in mid-September by seven states and the District of Columbia as well as XY Planning Network.
NASAA stated that it plans to follow the states’ attorneys general challenge to Reg BI “closely.” While it is not a party to the litigation it “supports members’ rights to protect their investors,” the association of state securities administrators said.
New Jersey’s fiduciary plan has been characterized as far exceeding Reg BI as well as the Labor Department’s now defunct fiduciary rule. The state’s rule seeks to “establish a uniform standard for financial professionals” and “rectify investor confusion that results from the lack of uniformity.”
Despite pushback from the brokerage industry, the New Jersey Securities Bureau forged ahead and proposed its fiduciary rule in mid-April before the final Reg BI was approved on June 5. The bureau said Reg BI lacked “sufficient protections for New Jersey investors.”
Gerold said in proposing the rule that it “codifies a standard that most investors believe they are already receiving from their financial professionals.”
New Jersey, Nevada and Massachusetts have proposed fiduciary rules but none have been finalized.
In his inaugural speech as president at the group’s annual conference in Austin in mid-September, Gerold said he’d continue NASAA’s collaboration with the SEC and the Financial Industry Regulatory Authority on investor protection initiatives.
“Protecting investors requires all hands-on deck,” he said. “We may not always agree, but that does not mean we cannot put differences aside to work toward our common mission of investor protection.”
Fraud Gets Personal
As regulators, Gerold continued in his speech, “the things we do matter. Chances are we may never meet many of the people we are helping — those who we have prevented from being victims. Enforcement of state and provincial securities laws is at the heart of what we do every day.”
Born in New Jersey, Gerold started his legal career as a Deputy Attorney General in the Securities Fraud Prosecution Section of the New Jersey Division of Law, where from 2005 to 2010 he represented the Bureau during investigations and as a lead trial attorney in litigated matters.
He relayed to attendees at the event in Austin the tale of a New Jersey couple who were “unsophisticated investors being ripped off.”
The story was about a traveling textile salesman and school nurse in the early 1990s who “had worked hard, saved money where they could, and were managing to successfully raise” three children.
“Through the years this couple had managed to set aside a moderate nest egg that they would use to pay for their children’s college when the time came,” Gerold said.
Then one day, they got a call from a broker who promised he could provide a greater return than the couple was receiving from their bank.
The couple met the broker and decided to invest the majority of their life savings with him. The broker met their children and “promised the investments he was selling were safe” and approved by the broker-dealer and that it would pay a high interest rate.
“Unfortunately, the product was a fraud,” Gerold said. The couple “lost their investment. It was gone. They lost their financial security. They lost their ability to pay for their children’s college,” he said.
