AUGUSTA – Congress is considering a proposal pushed by some investment bankers that Maine officials charge would cripple state efforts aimed at regulating those companies.

The proposal would take away the ability of the states to regulate the companies to the degree that the federal government does.

Several of the nation’s most prominent securities firms paid state and federal fines totaling $1.4 billion this spring after several states initiated actions against them.

“I think it is absolutely clear this would cripple enforcement efforts,” Christine Bruenn, Maine securities administrator and president of the National Association of Securities Administrators, said Friday. “This committee action Thursday goes beyond what was being discussed and would hurt consumers if it became law.”

The proposal is part of legislation that would increase the enforcement powers of the Securities and Exchange Commission, the federal agency charged with regulating the investment industry.

Bruenn said she supports many of the provisions of the proposal, but rejects the idea of taking away the concurrent responsibilities of the states to regulate the industry.

“We are the local cops on the beat,” she said. “We are talking with the victims every day and working with them. This would take away our ability to help these victims.”

Over half of all Mainers own some form of securities directly or indirectly, according to industry estimates. Often those securities are part of a retirement fund that an individual has established or is part of one established by his employer.

Earlier this year, 10 brokerage firms – including the nation’s largest, such as Merrill Lynch, Credit Suisse First Boston and Salomon Smith Barney – agreed to pay $1.4 billion in fines and restitution for using what regulators described as misleading and sometimes fraudulent practices.

Linda Conti, director of the Consumer Protection Division of the Maine Attorney General’s Office, said last week that the effort in Congress is part of a strategy by regulated industries across the country to “nationalize” enforcement efforts.

“That’s because they know the federal agencies will not be aggressive in taking the side of the person calling up on the phone with a complaint,” she said. “They hate us at the state level because we will actually sue them, at least occasionally.”

U.S. Rep. Richard Baker, R-La., is the sponsor of the legislation. He argues that the people who have been the victim of stock fraud should be the ones to benefit from any enforcement action, not government. He would have all the money go to the SEC and then be distributed by that agency to the victims of the fraud.

“If you’re the victim of a crime, you might get some satisfaction out of knowing that the car thief has been caught and thrown in the slammer and that your stolen property has been recovered,” he said when introducing the bill. “But to watch the sheriff and a bunch of lawyers after the trial pile into your car and drive away with it just isn’t justice, and isn’t an outcome you’re likely to consider fair.”

Bruenn said she agrees restitution should be made when possible, and pointed to the record in Maine.

From July 1, 2002, through May 31, 2003, her office returned more than $2.8 million to Mainers who had been the victims of fraud, while collecting $16,000 in fines that went into the state coffers.

“But in the Merrill Lynch settlement, we had no way to easily determine who was defrauded because the activity was so pervasive,” she said. “So in the negotiations, we opted to go for fines and corrective measures.”

That settlement brought $4.1 million to Maine’s general fund from the $1.4 billion collected from the brokerage firms.

The proposal faces opposition in the House. U.S. Rep. Michael Michaud of Maine’s 2nd District said in a statement that while he supports providing restitution to victims, he does not support taking away the concurrent jurisdiction of the states to police securities fraud.

Anyone who thinks he may have a claim against an investment firm can find more information at www.MaineSecuritiesReg.org.