The Alabama Securities Commission (ASC) released a report to the Alabama Legislature recently that highlights last fiscal year’s enforcement numbers and revenue brought to the Alabama General Fund. You can view the entire report at www.asc.alabama.gov. Concerning states’ securities regulation and enforcement, Alabama has probably secured more jail time for white collar criminals than any other state in proportion to population. Many who are prosecuted for violations of the Alabama Securities Act are brought back from other states or foreign countries by the long arm of Alabama law.

During Fiscal Year 2011, enforcement actions led to 26 arrests, 15 convictions with 31 awaiting trial, and helped secure 170 years’ incarceration for Defendants found in violation of the Alabama Securities Act. During the past five years the professional abilities and hard work of the Enforcement and Legal Divisions and ASC staff led to:

  • over 110 criminal indictments/warrants obtained for violations of securities law;.
  • the courts ordering over $20 million in victim restitution on behalf of Alabama investors;.
  • an order of over $67 million in victim restitution from joint state and federal cases; and.
  • $1.6 billion going to Alabama holders of auction rate securities (ARS) accounts, including full payment of ARS accounts involving the Jefferson County scandal.

Most violations of the Alabama Securities Act involve people offering investment opportunities without being properly registered with the ASC and many violations involve obvious fraud. With few exceptions, anyone offering to sell securities, providing financial advice for a fee or who offer investment products to any Alabama citizen, must be registered with the ASC. In FY 2011, registration fees for financial professionals and investment products, in addition to fines and settlements, produced a total of $17,776,255 in revenue, with $9,824,611 going directly into the State General Fund. Shortly after the arrival of its director, Joe Borg, in 1994, the ASC became a self-sufficient state agency. It hasn’t received any state tax funding or General Fund money since Joe came on board and has actually delivered almost $140 million to the State General Fund.

In FY 2011, the ASC relied on the investigative efforts of the Enforcement Division to help secure some of the largest securities-related financial settlements in the state’s history. Working tirelessly with a multi-state task force of securities regulators in the southeastern U.S. region, the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, the division investigated complaints related to seven large proprietary mutual funds administered by Morgan Keegan and Company and Morgan Asset Management. The companies were ordered to pay $200 million to establish independently administered funds for the benefit of investors who had lost money, including approximately 5,800 Alabama investors. After recovery of all expenses, the State received an additional $1.7 million in penalties.

The ASC’s Education and Public Affairs Division is very proactive in support of the agency’s objective to inform and educate Alabamians of all ages and economic backgrounds on the many aspects of saving and investing and about making informed and prudent financial decisions. Programs are structured to offer the most timely and relevant financial education information available to Alabama’s youth (K-12 and college students), working adults and retired seniors. The ASC provides these groups free financial educational seminars and printed materials. The Division averages 70 financial education presentations each fiscal year to Alabama citizens, as well as to social, civic and professional groups throughout our state.

During FY 2011, the Education and Public Affairs Division and ASC staff conducted a record 79 events that provided direct outreach and instruction to 5,505 citizens and helped acquire more than $200,000 in grant money from the Investor Protection Trust and the Financial Industry Regulatory Authority which is based in Washington, D.C. Grant funds supported Alabama business for the purchase of advertising, media outreach, and to support the expense of investor education and fraud prevention events throughout Alabama.

All Alabamians should be proud of the expertise, dedication and support Joe Borg and his highly professional staff of 50 personnel have provided for the security and benefit of the citizens of Alabama. Joe and his team are all to be commended for their excellent work on behalf of Alabama and its citizens.

Source: Dan Lord, ASC

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