Joseph Borg: Alabama’s stock cop

Joseph Borg, the director of the Alabama Securities Commission, has been called “Alabama’s stock cop”, “Wall Street’s worst nightmare” and “A well known tough guy among state securities regulators” by the American media.

The New York born son of Maltese immigrants, Mr Borg once said: “Alabama is on the map. This is not the place you want to be a crook”. He has earned a reputation in the United States as a fair, efficient and tough prosecutor and securities commissioner who heads an organisation which in his words “prefers to go after crooks than eat or sleep”.

The Alabama Securities Commission regulates the securities industry in Alabama and is committed to protect investors against securities fraud and provides aggressive enforcement actions against any firm or individual who has violated the Alabama Securities Act or other state and federal statutes to the detriment of Alabama investors.

How did he explain the Alabama Securities Commission’s success in fighting securities fraud?

“I think our success starts with the people in our organisation. We have had almost no turnover in staff (except retirements) for the past 10 to15 years and all are extremely dedicated to our mission of protecting the investing public. The cases we investigate and bring to either civil or criminal courts are all handled internally – our auditors, examiners, investigators (law enforcement) and attorneys are all dedicated exclusively to the securities area and we have developed such an expertise in this area that we are called upon often for advice and training,” he tells the Times Business.

Mr Borg points out that the same members of staff handle the complaint and investigation all the way to the final resolution and the matter at hand is not “shuffled” to another agency or department.

“There is a continuity of expertise in the development of each case from inception to final resolution. We also expend a large amount of time in continual training in the latest technology and techniques.

“Also of importance is that each staff member is considered a professional with great latitude in the decisions affecting their case or investigation and resources are dedicated to the completeness of the investigation, administrative hearing or court proceeding.

“Our state legislators have recognised the contributions made by our agency and have set up a dedicated funding source. This Commission is a net contributor to the state revenues and is generally not subject to swings in funding which can significantly damage the effectiveness of an agency such as ours,” he says.

Mr Borg says he has been to Malta on several occasions and constantly keeps in touch with his relatives.

“I am extremely proud of my Maltese heritage – as you can imagine, there are not too many Maltese in Alabama, but all the news media who cover our fraud cases are well aware of Malta as part of my background, the spirit of the Maltese during the war, its special place in history over the centuries and – as some might say – the ‘determination’ of our culture, others would say ‘stubbornness’!!”

He says his parents have spent most of their summers in Malta except for the past few years (his father is 85 and his mother is 83) and overseas travelling has become more difficult for them. However, they are planning a visit this July and he hopes to accompany them for a short time.

“I have also maintained communication with the Malta Financial Services Authority through our international securities regulators association (IOSCO) and was recently exchanging information with the MFSA on matters of joint interest.”

Mr Borg moved to Alabama after graduating from law school at Long Island’s Hofstra University and going to Montgomery to work as a defence lawyer. He has headed the Alabama Securities Commission since 1994. Mr Borg is twice past president of the North American Securities Administrators Association (NASAA) and serves as a member of its board of directors, ombudsman and chair of the international committee.

Mr Borg has testified before various committees of the US Senate and US House of Representatives including recent testimony on such areas as microcap fraud, criminal elements in the financial markets and information sharing among financial regulatory agencies. He also testified about risks posed to everyday investors from initial public offerings of private equity and hedge fund firms and the illegal investment sales practices that victimise senior citizens.

He also served as a US delegate to an Intergovernmental Expert Group for the United Nations Commission on International Trade and Law (UNCITRAL).

Mr Borg previously served as in-house corporate counsel to First Alabama Bank (now known as Regions Bank, 1979-1984) and has been an adjunct professor of law at Faulkner University Jones School of Law teaching securities law and banking (1982-2002), and a partner in the Montgomery law firm of Capouano, Wampold, Prestwood & Sansone (1984-1994).

He is admitted to practice in Alabama, Florida, New York, US Federal District Courts in Alabama and Florida, the fifth and 11th Circuit Courts of Appeal and the US Supreme Court.

Mr Borg explains that the Alabama Securities Commission regulates the securities and investment community. All brokers, intermediaries, investment advisors, mutual funds and financial planners must be licensed or registered with the Commission in order to conduct business with any person or business in Alabama.

“At present there are approximately 90,000 licensed broker dealer representatives (agents), 6,500 mutual funds, 140 investment advisor companies. Also the Agency reviews filings for offerings of new companies that are not on the major stock exchanges. The Agency has broad powers including administrative, civil and criminal jurisdiction.

“White collar frauds such as ponzi and pyramid schemes, foreign currency, off-shore tax deals, oil and gas deals and any general financial fraud on citizens are investigated and prosecuted by this office. Our Commission also reviews all industrial revenue bonds prior to being issued and sold and must issue a clearance order before the bond deal can go forward. The Agency also licenses money transmitters, debt settlement and debt reorganisation companies and businesses.”

Can America as a whole learn from the success of the ASC and can the ASC be a model for the US federal authorities in fighting financial crimes?

“We have developed a model that works well – it requires that those holding positions to make a difference have the authority to make decisions for the best interest of our citizens, free from political or special interest considerations.

“Other states have asked for information on our model. On the federal side, I think the US Securities and Exchange Commission as the national regulator is hampered by resource issues as they do not have dedicated revenue sources and are dependent on federal appropriations regardless of the revenue they generate.

“They have dedicated staff but without sufficient resources or authority they can be hampered. The SEC is not a law enforcement agency that can prosecute cases but must rely on other agencies for further case development. We work well with both the SEC as the national regulator and FINRA (former NASD – the industry self regulator) as well as the US Attorneys, FBI and Department of Justice and other banking and insurance regulators,” he says.