S.B. 82 Securities Investor Education, Training, and Enforcement Fund Amendments: transcript

This is, uh, uh, Senate Bill 82, securities Investor Education, training and Enforcement Fund. Okay. If you're ready. So every, every year this fund, uh, will receive some, some form of money that the Department of Commerce uses. The money that comes to this fund is typically comes through lawsuits. Um, what we're doing is we're simply increasing the cap, the amount of money that they can use, um, and grow, right? Right. Now, if they, which just doesn't typically happen. If a dollar amount goes above 500,000, they're in a race to use it, and they, and they use it as quickly as they can before the end of the year. And I think for planning and for the purpose of this fund, I think that doesn't make sense. I think allowing them to keep some of that money a little bit longer so they can make some long-term planning rather than race to use the funds. Makes a lot of sense. With that, I'll turn, I'll turn time over to my co-presenter.

Yes, sir. My name is Robert Cummings. I'm the director of the Utah Division of Securities.

Um, I wanted to say thank Senator Kel for bringing this forward and thank you. Vice chair. Um, when I joined the Utah Division of Securities and learned about the Investor education fund, I thought it was an ingenious statute. The fines that we received from our administrative proceedings going after either licensees, the violate the rules, or, um, security fraudsters, or people selling securities without a license, that money directly goes to our enforcement efforts, uh, moving forward, but then also funds our investor education efforts, which we're statutorily mandated to engage in right now. Um, as Senator ml mentioned, once we're up at $500,000 at the end of the fiscal year, any amount over that, uh, is swept into the general fund. And prudentially, we want to keep 500 in the account so that we have money in the account for the following year, um, for budgeting purposes. But if we don't receive any fines for that next year, we would run out the money within about, um, four to six months. And so we don't have much room to be deliberate about our spending on our investigation efforts and, um, investor education efforts. And as we all know, as fraudsters get more, uh, creative and technologically advanced, the tools that we need to go after fraudsters are becoming just as advanced and are expensive. Um, I would like to note that, uh, this was already approved by the general, uh, government appropriations. Um, it was, uh, commerce's request to the governor's office, um, and it was the only request from commerce, uh, to have this increased. Um, so with that, I'd be happy to answer any questions, but overall, it's, as Senator Mikel said, it's allow, it's going to allow us to be more deliberate and precise on our, uh, investing in the future. That concludes our presentation. Thank you.

Yes, we are. Um, they are a separate department. We fall under the Department of Commerce. Um, some states have their securities division under the, um, state Department. Others have it under financial institutions. We fall under commerce.

Thank you, Mr. Chair. Um, so wouldn't you be punishing fraud with courts instead of using dedicated funds to grow the agency? Agency? I, I, can you repeat the question? Like, Wouldn't it be more prudent to be punishing fraud in the courts as opposed to using dedicated funds to help the a, like just to grow an agency?

Oh, so, and I, I, I, I should unpack that. Um, we have several tools that we can use to go after fraudsters. Um, the administrative proceeding we use to make sure that we get a bar so that whoever has engaged in unlicensed activity is barred from the securities industry going forward. But then we also have statutory authority to refer to the, um, department of Justice are Attorney General's office or county attorneys. So if it's a fraud and we believe it amounts to a crime, we then refer it over. And most of the securities fraud cases or wire fraud cases you hear in federal court, including the Alpha influence case last May, um, which was a $20 million fraud, or, um, oh, I can't remember his name, down south. It was another $20 million fraud. Those originate in our office and our investigations. So it's not necessarily to grow our office either, it's to purchase, for example, uh, uh, licenses to engage in blockchain analysis to trace funds if we have a crypto fraud.

Thank you, Mr. Chair. Thank you.

Thank you. Mr. Chair. Is there reporting to the legislature on this, on this fund? And and how often is that?

And looks like Representative Fiefia. Thank you, Mr. Chair. I move that we pass out favorably SB 82 to the full house. The motion is to favorably recommend SB 82 securities Investor education, training enforcement fund amendments to the full house.

Thank, we have a very riveting bill. I dunno if that's turned on or not. I might just turned it off. You can hear me Well, I can't turn it on. I have no technology here for turning on. Well, I'm just gonna go through it, seat it to my, the top really well, seated to my left is Robert, um, Cummings. He's from the Department of Commerce. He's gonna explain the bill, but it is just like it says, we're increasing the cap on the security investor education, training, and enforcement fund. We get some of these funds through lawsuits, and when we have class action lawsuits, money comes in. The concern that we have right now, um, at $500,000 cap, oftentimes there's a race to spend the money instead of use the money and plan and, and use it in an appropriate way. But I'll, I'll turn the time over to Robert and he can give, he can answer all the hard questions. Okay. Thank you very much.

Yes. Uh, my name is Robert Cummings. I'm the director of the Utah Division of Securities in the Utah Department of Commerce.

Uh, thank you Chair. Uh, I appreciate Senator Mikel, uh, presenting the bill and sponsoring the bill before the Senate. Um, he's exactly right on, on on the description that he provided. The investor education fund is an incredibly pragmatic and cost effective way for us to do our job, essentially finds that we assess in our administrative proceedings, um, or through our compliance exams or through settlements or put into the fund. And in turn, that's what we use for investigation and enforcement to go after Ponzi schemes, security fraudsters, um, and the like. And then we also use it for proactive investor education and industry education. Um, the budget right now essentially gives us a $500,000 operational fund. Any amount over that, uh, amount come April, the end of the fiscal year is swept into the general fund. And so that's why we, we b we budget on a $500,000 balance. Um, currently we look at having around $70,000 coming in each quarter. Um, as a conservative estimate, we're not sure if and when or the money will come in, but if that is the only money that we have come into the fund, we'd be running in the negative, um, by the third quarter. So luckily we have money come in more than that amount. Um, and as Senator Mikel said, sometimes they're larger settlements, they're larger fines. And luckily that pushes us through the year. But what we would like to do is shift from having an operational budget for the year and start planning and investing for larger projects going forward, primarily in the investor, investor education sector. Um, right now, if we have extra funds, we can opt to do, um, uh, different conferences or what have you. For investor education, I would like to try to develop projects with social media campaigns to get in front of our youth. 18 to 30 year olds, uh, primarily who are one of the largest, uh, targets for financial fraud currently. Um, and then also investigation in our cases is getting it more expensive. Um, for blockchain analysis, we have to have a license for a company called Chain Analysis, which I believe is about $30,000 a year. And then we have costs beyond that to actually run the analysis, to do the investigation, to identify the fraudsters so we can go after them and hopefully prosecute them criminally. Um, and there's other, uh, software programs along the, uh, along those lines, but that in paying for those programs, we are simply operating at a baseline and we would like to be able to invest in larger projects, better tools, and be able to plan accordingly going forward. And, and, and let me, before we wrap up, Senator Millner, I did have a chance to talk to Margaret Bussey. We've reviewed this. This is their, this is their number one budget priority. I I think this is their only budget priority from the Department of Commerce given, given where the budget is today. And just, I think it's important to note.

I move that we favorably recommend this Bill, uh, to the floor of the Senate.

I need a little bit of luck. Monday. Monday one 15.

You, uh, Mr. President ProAm. This Ms. Bill takes the cap that they're able to to use in their budget from 500,000 to a million dollars. Um, I served as the Beatle chair for a couple years and one of the things we did is a, is a comprehensive fee review and made sure that in the Department of Commerce, all of their fees were were in line with the actual, actual cost. There are times when some funds come through, when, when they can prioritize some of the projects that they need. Um, the funds that come into this actually come in through litigation and when they're, when they're able to use upwards of, of $500,000, they, they have, they've been in a race to use those as quickly as possible. This gives them a little more flexibility to use funds that come in this. Most of what comes in, in this situation is through, through litigation, but I, I think this is a good change. It gives them a little, a little added flexibility. Use these funds appropriately. With that, I'd open for questions.

Thank you. I'll waive summation and move this bill. Be read for third time.

and it's a good common sense Bill. Um, when I chaired Beetle, what we tried to do is make sure that the fees that they were collecting were, were reflective of the services they were providing. Um, this is one of the, this is a different kind of fund that they continue to use, um, at the end, at the end of the year. This this, this fund is specific to lawsuits where they receive funding and they use money from that fund, um, to fund programs in education. And what this does is it simply takes that 500,000 to a million dollars, um, if they have that leftover amount in their budget so that there's not a race to spend to spend the money. This will give them chance to be collaborative and come up with programs that are, that are helpful rather than race to spend money. With that, I'd urge support and open up for questions.

Thank you. Thank you Mr. President. Having voted on the prevailing side yesterday, I'd like to recall Senate Bill one 15 first substitute animal abuse reporting amendments. Thank you. And I think the motion is to reconsider actions. Is that what we're trying to do? Reconsider action. That bill actually failed on the floor. So we're trying to reconsider actions on Senate bill one 15 animal Animal abuse reporting amendments And be supporting amendments.

I really, I appreciate it being Brought.

Place the motion Please. Thank you.

Thank you Mr. President to correct just, uh, some broad, uh, and duplicative regulations that were created in a bill we passed last year. This just, uh, exempts advanced practice clinicians, um, from uh, just this bill we passed last year on healthcare services platforms. So we just worked over the interim with the stakeholders and arrived at this consensus.

Thank you. Um, Mr. President, I wanted to get some time to visit with the aye on two.

So I'm gonna move to circle.

of the president, Madam Reading Clerk Senate Bill 82, securities Investor Education, training and Enforcement Fund amendments by Senator Mikel. This bill was started Economic Development and Workforce Services with the vote 6 1 3. The House sponsors Representative Shallenberger.

Thank you Mr. Speaker. This is coming from the Department of Commerce, specifically the division of securities or the state, SEC. And this division, uh, focuses on, uh, dealing with security, fraud, scams, uh, those types of things that you're getting in your texts, your emails, uh, your calls or any of the bank fraud that's going on. And it's a problem rampant or state and country. Uh, this division is funded, specifically has a fund to deal with education, with training, and then prosecuting and trying to go after enforcement of these areas. Uh, it's funded through fines and, but it's capped at $500,000 for their budget. That is about six months of the year for their enforcement, their education training. This bill simply is a, uh, increasing that limit to a million dollars that will let them plan out and budget for the full year for their education, their training, and the enforcement to go after security fraud and scam efforts that are going on out there. That is it. I conclude my presentation. Thank you.