Securities department says fees cover its operations; commissioner details large fraud investigations and education fund payout

House Bill 1011: The North Dakota Securities Department sought a $3,413,261 appropriation for the 2025–27 biennium at a hearing of the House Appropriations Government Operations Division on HB1011.

Tim Karski, North Dakota Securities Commissioner, told the committee the agency is largely self-funded and that "the Securities Department is a small agency with 10 full time employees." He said the department's biennial request breaks down to $2,770,090 for salaries and wages and $643,171 for operating expenses, and that the agency expects revenue in the coming biennium "to be equal or similar to the 2023–25 biennium of approximately $24,000,000." Karski said the department is on track in the current biennium to meet or exceed roughly $26 million in receipts.

Why it matters: The department licenses and examines broker‑dealers and investment advisers, investigates investment fraud and supports criminal prosecutions — functions that the commissioner said absorb most agency resources. Karski told the committee the department "register[s] and regulate[s] the conduct of the securities industry firms and professionals who want to do business in the state" and performs conduct-focused examinations and enforcement.

Major investigations and restitution: Karski described two large investigations during 2023–24. He said the agency worked with federal and other state regulators on a nationwide Ponzi scheme that he described as involving about $130 million nationally and said North Dakota investors were among the most affected, with "approximately $45,000,000" in investor losses. Candace Johnson, a department staff member who worked on the case, said a federally appointed receiver is managing asset recovery and that the amount recoverable for investors is "yet to be determined." Representative Meyer asked when the activity began; Johnson said the scheme dated to early 2023.

Settlement funds and education: Committee members asked about a multistate settlement involving Edward Jones. Karski said the company cooperated and that the state’s share "is what's in the press release," and that those monies will be used for investor education programs. He told the committee the settlement amount going to education was determined as part of the multistate agreement rather than by the department. Representative Fisher asked why some settlement proceeds go into an education fund rather than the general fund; Brady Larson of the Legislative Council confirmed settlements and certain restitution/education receipts can be deposited to statutorily authorized special funds managed by the Securities Department.

Industry snapshot and fees: Karski described the department's revenue sources: securities registration/filings and registration of industry firms and professionals. He said the department handled automated renewals through the Central Registration Depository (CRD) and cited a recent renewal payment of over $7,800,000 for roughly 124,255 renewals. Committee members asked how fees are set; Karski and staff said many fees are established by statute.

Staffing and operations: Karski said the department has four vacant positions, is rebuilding after years of limited turnover followed by a wave of retirements, and requested modest operating flexibility. He described work to hire an attorney and investigators and said some legal work is charged hourly through the Attorney General's Office. On the budget's operating side, Karski asked the committee to consider adding $30,000 in operating funds to cover outside-attorney costs tied to complex investigations; he said he would follow up with details. Cody Schmidt, an examiner/investigator, confirmed licensing fees for industry professionals (agents and investment advisers) and answered member questions about fee levels.

Fintech, social media and crypto risks: Karski told members fintech innovations pose new regulatory challenges, including crypto, social-media‑driven trading, token offerings and related fraud. He described how fraudsters use social platforms and fake trading sites to lure victims, often promising short-term trading gains, then require additional payments to withdraw funds — a pattern that can disproportionately harm seniors. Several legislators urged continued focus on staffing and technical expertise as these risks evolve.

Committee process: The clerk read HB1011 and opened the public hearing; committee members questioned the commissioner but no final vote on the bill was recorded during the hearing.

Ending: Karski concluded by offering to provide requested materials and follow-up figures to the committee, and the division recessed to take up additional agenda items.