09/17/2012 08:02 am ET Updated Nov 17, 2012

A. Heath Abshure Of North American Securities Administrators Association Reveals Deep Small Business Roots

By Suzanne Barlyn

CORONADO, California (Reuters) - Critics of U.S. state securities regulators say they are out of touch with the needs of small business in a cyber-world. But A. Heath Abshure, who recently stepped up to lead the state regulators' national organization, says he is proof that they are not.

"I owe everything I am to small business," said Abshure, the new president of the North American Securities Administrators Association. Still, he recognizes "the characteristics that make small business investment inappropriate for typical retail investors," he told Reuters in an interview at the group's annual conference in Coronado, California, last week.

Abshure, who once rode his Harley-Davidson 450 miles to the group's annual conference, is known among regulators as a straight shooter who does not back down. He takes charge of the group at a time when Washington lawmakers have been trying to curb state regulators' authority.


Abshure is also Arkansas securities commissioner. He was 12 when his father launched a successful fire sprinkler business from the family's living room. His grandmother started a clothing store that his mother later inherited and ran. Even now, his in-laws run a Montana-based business selling hand-made candies.

So it may seem odd that Abshure, 39, led NASAA's recent fight to change federal legislation that will make it easier for small businesses to raise capital through "crowdfunding," a strategy that lets investors buy small stakes in ventures through various websites.

State regulators tried unsuccessfully to convince federal lawmakers that they needed direct authority under the JOBS Act, enacted in April, to review crowdfunding offerings before investors plunk down money. That, Abshure says, would have helped to prevent investment scams by ensuring the offerings meet state regulatory requirements.

Hefty failure rates among small businesses translate to an extremely risky investment, he said. While angel investors and venture capitalists have the tools to assess those risks, mom-and-pop investors do not, he said. "What we're doing now is opening that up to people who can't afford to suffer those losses," Abshure said.

Another bill could force state regulators to defer to a private regulator for the ultimate say over certain investment advisers they now oversee.

The ongoing swipes at state regulators' authority stem from what he calls a mistaken notion that they "add another unnecessary layer of cost and burden," Abshure said. But transactions that take place in his "backyard" are often too small for the U.S. Securities and Exchange Commission to even acknowledge, he said. "Do you honestly think anyone that's looking to raise $50,000 to $100,000 is really going to be able to call the SEC and get anything out of them?" Abshure asked.


Becoming Arkansas securities commissioner was not among Abshure's career plans. He pursued the role because the governor asked, he said.

His appointment in 2007 by Arkansas Gov. Mike Beebe, a Democrat, was the culmination of an educational and career path that includes a law degree in 1998 from the University of Arkansas at Little Rock and a Master of Laws in securities and financial regulation from Georgetown University Law Center in Washington.

While at Georgetown, Abshure worked as a lawyer for the SEC, helping to advise the agency's administrative law judges. He returned to Little Rock in 2002 and worked for a law firm.

Abshure's high standards for the Arkansas securities department have led to enforcement cases that are "better prepared and better written," said David Smith, chief counsel and a 24-year agency veteran. The agency's 40-person staff also oversees mortgage lenders and currency exchangers, among other things.

In an effort to boost early awareness about risk, Abshure is a board member for Economics Arkansas, a Little Rock-based nonprofit group that helps integrate financial know-how into the state's school curriculum. He is involved with the group's "Stock Market Game Program," in which student teams learn to manage a $100,000 hypothetical portfolio over 10-week periods.

Abshure, who enjoys hunting, sometimes uses drums of peanutbutter to bait deer. His 450-mile motorcycle trek from Little Rock to NASAA's annual conference in Wichita, Kansas, figures to be a colorful anecdote shared by regulators for years to come. While lugging suits and documents via motorcycle may not seem like the most practical means of business travel, Abshure did not flinch - he stuffed the saddlebags.

As Abshure takes charge of NASAA, the battleground over crowdfunding now shifts to the SEC, which is writing rules to regulate the new type of investing.

Abshure, who wore a lavender paisley bow tie during his conference address, urged state regulators to "develop an offense" and come up with their own legislation to promote in Washington. Among the ideas he hopes to see move forward: restrictions that would protect investors who do not want to receive offers for crowdfunding or certain types of risky unregistered securities.

He is tired, he told regulators, of NASAA members having to respond to others' "harebrained" bills on Capitol Hill.

(Editing by Matthew Lewis)