The North American Securities Administrators Association ("NASAA") requested input on a proposal that would provide funding to victims of securities law violations that result in a loss of funds.
According to NASAA, the "Model to Create a Restitution Fund for Victims of Securities Violations Act" would:
- provide securities restitution assistance funding to victims who were awarded restitution but have not yet received full payment;
- offer examples of potential funding sources;
- implement a fund for state securities restitution assistance;
- establish eligibility requirements for those able to receive such assistance;
- impose a cap at the lesser of $25,000 or 25 percent of the amount of unpaid restitution that may be provided to a victim; and
- offer "recovery mechanisms."
NASAA noted that if enacted, provisions under the proposal would be left to the discretion of each jurisdiction. The proposal would also (i) permit each jurisdiction to recover restitution assistance awards (or provide that awards are forfeited or must be refunded under certain circumstances), (ii) subrogate each jurisdiction to the rights of the restitution recipient, and (iii) allow a jurisdiction to suspend claims if the balance of a fund falls below $250,000.
Comments on the proposal must be submitted July 31, 2020.
Commentary Steven Lofchie
It is difficult to see the policy logic of this: why provide restitution to someone whose money was lost by a securities law violation, but not to an individual whose car was stolen, or whose house was robbed? The state serves as a general but not a complete or comprehensive insurer against different types of individual misfortunes. Where is the logic of favoring victims of securities fraud over other persons in need?
Originally published July 02, 2020.
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