The Utah Division of Securities may have been criticized in a recent legislative audit, but that doesn't mean lawmakers want the division to disappear.

The Legislature's Business and Labor Interim Committee on Wednesday voted to reauthorize the Utah Uniform Securities Act, which governs the division, for two more years. The act is scheduled to be repealed on July 1, 2009.

Keith Woodwell, the division's director, told the committee that Utah faces becoming the only state without a securities act to protect investors. He said that would result in "open season for Utah investors for unscrupulous securities brokers or others who may be trying to scam people with investment deals."

An audit released in early July described the division as rife with personnel conflicts, with unclear roles in handling duties and inconsistently and sometime inappropriate management of cases. The audit primarily attributed the problems to the division not following established policies and procedures.

Woodwell said Wednesday that the division's actions during the past five years have resulted in $124 million in restitutions to Utah investors when dealers lost or stole their money.

"And frankly, that's probably only the tip of the iceberg. If we didn't have these regulations, Utah would be facing probably a much larger problem when we deal with investment fraud (and) other types of scams that come along," he said.

The act allows the division to enforce securities laws and educate Utahns about both legitimate and troublesome investments.

Troubles at global financial institutions in recent weeks "are directly related to the mission of the Division of Securities," Woodwell said. "Frankly, this is a time when regulation is really needed. We have a financial industry now in the nation and in the state that is on some pretty shaky ground, and that opens the window up to people who want to perpetrate frauds."

"We believe this is necessary regulation, that it actually strengthens Utah's business community by ensuring that the securities industry here is a legitimate industry and that we work with the legitimate industry to weed out any bad actors on the fringes who are preying upon Utah investors, losing their money or, frankly, in some cases just stealing their money."

Woodwell said he did not dispute the audit's finding and that the division has implemented almost all of the report's recommendations. The division is working on a bill that would structure it with a commission rather than an advisory board for oversight, and the commission would have the adjudicative role currently occupied by the division director.

Senate Majority Whip Gene Davis, D-Salt Lake, suggested the two-year reauthorization. "I don't think we want to repeal the division in July," he said, "but to put it on for two years so that we have then some oversight and follow-up on what's going on within the uniform securities within the state of Utah."

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