Home News State Regulators Propose Establishing Restitution Fund for Victims of Securities Law Violations

State Regulators Propose Establishing Restitution Fund for Victims of Securities Law Violations

The board of North American Securities Administrators Association (NASAA) is seeking public comment of a proposal that would assist states in creating a restitution assistance fund for victims of securities law violations.

The board of North American Securities Administrators Association (NASAA) is seeking public comment on a proposal that would assist states in creating a restitution assistance fund for victims of securities law violations.

“The intent of this model legislation is to provide financial assistance to victims of securities law violations who were awarded restitution but have not received full payment,” said Christopher W. Gerold, NASAA president and chief of the New Jersey Bureau of Securities.

Among other provisions, the model act would establish a state securities restitution assistance fund, outline eligibility requirements for victims seeking restitution assistance, set payment caps on the amount of restitution assistance awards, prohibit and forfeit awards in certain circumstances, and provide for recovery mechanisms.

The model provides that restitution assistance awards are capped at the lesser of $25,000 or 25 percent of the amount of unpaid restitution awarded, or the lesser of $50,000 or 50 percent, if the victim is a vulnerable person, subject to waivers for good cause.

NASAA said that the proposal draws upon similar legislation in Indiana, Montana, Vermont, Kansas and Maine. Gerold noted that Indiana and Montana enacted this type of legislation nearly a decade ago and have reported that their restitution assistance programs are successful.

Indiana was the first state to establish a restitution fund. Since the inception of its fund in 2010, Indiana has paid approximately $1 million in restitution assistance awards to 102 claimants. Montana, which established its fund in 2011, has paid $1.6 million to 118 claimants. The average amount of the awards was $10,000 in Indiana and $13,631 in Montana. The average recipient was 64 years old in Indiana, and 82 percent of recipients were over 60 years old in Montana.

“In many cases, victims of securities fraud are only able to recover pennies on the dollar. This model legislation would give state securities regulators the ability to provide greater financial relief to victims, which is particularly important to seniors and other vulnerable adults living on a fixed income,” Gerold said.

The proposed model act is included in the Notice of Request for Public Comment on the NASAA website or can be read here. The proposal is open for public comment through July 31, 2020.

At the close of the comment period, comments will be reviewed to determine if any revisions are required before it goes to the NASAA membership for a vote to adopt, likely during NASAA’s annual meeting in September.

Upon adoption it would be made available to NASAA members for consideration in their jurisdictions. Depending on the individual jurisdiction, the act may be adopted as legislation during state legislative sessions or implemented by regulation.

Formed in 1919, NASAA is the non-profit association of state, provincial, and territorial securities regulators in the United States, Canada and Mexico. NASAA has 67 members, including the securities regulators in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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