Change securities law, panel told

Stephens Inc. says rules needed so fines stay on right track

Heath Abshure, Arkansas Securities Department commissioner, testifies Wednesday before the Joint Performance Review Committee.
Heath Abshure, Arkansas Securities Department commissioner, testifies Wednesday before the Joint Performance Review Committee.

Stephens Inc. suggested to a legislative committee Wednesday that several changes be made in the Arkansas Securities Act to prevent what could be considered abuses of the law.

David Knight, general counsel for Little Rock-based Stephens, the largest Arkansas securities firm, made the recommendations to the Joint Performance Review Committee.

The committee questioned Heath Abshure, state Securities Department commissioner, about donations by securities firms to nonprofit organizations in lieu of paying a fine.

More than $170,000 in donations were made to the North American Securities Administrators Association by three securities firms who were under investigation by the Securities Department.

The largest donation of $150,000 was paid by Little Rock-based Crews & Associates.

At the time of the donations, Abshure was either a board member of the organization or its president.

There should be clarifying language in the law that prevents the Securities Department’s commissioner from directing enforcement-related contributions to outside organizations instead of to the state treasury, Knight said in prepared remarks to the committee.

The law also should be revised to eliminate the deposit of fines and payments to the Securities Department Fund, Knight said.

“This creates a conflict of interest,” Knight told the committee. “People should be fined because of the type of conduct that they engaged in, and that money should just go to the[state] treasury. It should not go into the operating budget where the people prosecuting the case are getting paid salaries from fine money.”

At times, the securities commissioner acts as the administrative judge in cases in which he has not been involved.

“What you have here is you have one person [the commissioner] wearing too many hats, too much discretion and too much power,” Knight told the committee.

Knight also said a company or individual under investigation by the Securities Department should be able to seek judicial relief should the investigated party believe that the Securities Department is “investigating you for harassment purposes or acting in bad faith or any improper motive, you would have an opportunity to go into court and seek an injunction.”

Before the Legislature makes changes to the law, Abshure said in an interview after the hearing, it should ask other securities firms and Arkansas consumers if they are in agreement with Stephens’ suggestions.

“I think most regulated entities would much prefer to have an administrative consent order rather than a full-blown finding in a court of law,” Abshure said.

After facing questions from legislators and a complaint filed with the Arkansas Ethics Commission concerning donations to nonprofit groups, Abshure said he “will not [allow contributions] at all.”

“We won’t even offer it,” Abshure said.

Mike Millar, a Searcy attorney representing Crews & Associates, said after the hearing that Crews never asked Abshure if it could make a donation in lieu of a fine. Abshure had testified that Crews asked what it could do to avoid a fine.

Instead, the Securities Department offered to allow Crews make a donation, Millar said.

“We concluded that was the preference, so we elected to go that way,” Millar said.

At that point, there had been no discussion about the amount of a fine, Millar said.

Millar said he attended the hearing as Crews & Associates’ representative to support the changes that Stephens suggested be made to the Arkansas Securities Act.

Representatives from Crews did not ask to testify before the committee, and they were not questioned.

Business, Pages 23 on 01/23/2014

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