Securities Regulation Daily As West Virginia’s Hopkins takes the helm, NASAA adopts model whistleblower act
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Tuesday, September 1, 2020

As West Virginia’s Hopkins takes the helm, NASAA adopts model whistleblower act

By John M. Jascob, J.D., LL.M.

At their first-ever virtual annual meeting, state and provincial securities regulators have installed Lisa A. Hopkins as president while approving model provisions designed to encourage the reporting of potential securities violations.

Senior Deputy Commissioner of Securities Lisa Hopkins of West Virginia has taken office as the president of the North American Securities Administrators Association (NASAA) for the 2020-2021 term. Hopkins assumes the leadership of NASAA at the Association’s 103rd annual meeting, which is being held virtually for the first time due to the COVID-19 pandemic. During the two-day event, NASAA also announced that its members have adopted a model act designed to help states provide a safe environment for individuals to come forward to report suspected wrongful securities practices to state regulators.

Hopkins joined the West Virginia State Auditor’s Office in 1999, serving in the roles of general counsel and deputy commissioner of securities. In 2016, she was appointed by Governor Earl Ray Tomblin as the first woman to serve as West Virginia's state auditor, continuing in that position until John B. McCuskey took office in 2017. Prior to her election to NASAA’s board as president-elect last year, Hopkins chaired NASAA’s Investment Advisor and Corporate Finance Section Committees. She received her B.A. from Barnard College, Columbia University, and her J.D. from the Boston University College of Law.

During the conference’s opening session, Hopkins announced that Maryland Securities Commissioner Melanie Senter Lubin has been chosen by the membership as NASAA’s president-elect. Lubin will assume the presidency at the conclusion of Hopkins’ one-year term during NASAA’s annual meeting in 2021. Hopkins also presented outgoing NASAA President Christopher W. Gerold of New Jersey with NASAA’s highest award, the Blue Sky Cube, thanking him for his service during the unprecedented period that followed the spread of the coronavirus.

Model whistleblower act. Drawing upon provisions contained in Section 922 of the Dodd-Frank Act as well as those found in state laws in Indiana and Utah, the NASAA Model Whistleblower Award and Protection Act provides an adopting state’s securities regulator with the authority to make monetary awards of up to 30 percent of the monetary sanctions recovered in any related administrative or judicial action. The model act also would protect whistleblower confidentiality, prohibit retaliation by a whistleblower’s employer, and create a cause of action and provide relief for whistleblowers who have been subject to employer retaliation.

"Through this model act, we hope to encourage individuals with knowledge of potential securities law violations to report it to state regulators in the interest of investor protection," said outgoing President Gerold in a news release. "Providing a safe environment for whistleblowers to come forward can lead to the earlier detection of securities law violations, which, in turn, provides regulators with greater opportunities to prevent harm to additional investors by disrupting alleged misconduct sooner."

NASAA advised that the act may be adopted either as legislation or implemented by regulation. Among other things. the model act’s prefatory note encourages states to keep procedural requirements for making a whistleblower complaint simple and accessible. The prefatory note also provides that it is within the discretion of the securities administrator whether to make an award based on an order of restitution, and suggests that adopting states should consider keeping the source of funds out of which whistleblower awards will be paid segregated from the operational funds of the state regulatory agency. Interpretation of the model act may be guided by reference to the whistleblower rules adopted by SEC in Exchange Act Rule 21F where those rules are not inconsistent.

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