Strategic Plan | September 1, 2004

Agencies

Mission statement

The mission of the Department of Professional and Financial Regulation is to encourage sound, ethical business practices through high quality, impartial and efficient regulation of insurers, financial institutions, investment advisers, creditors and numerous professions and occupations for the purpose of protecting the citizens of Maine.

Analysis of environment

The Department of Professional and Financial Regulation is comprised of numerous financial, professional and occupational regulatory entities. The Department is physically located at 122 Northern Avenue, Gardiner, Maine, in an office building known as the Gardiner Annex. Its Internet address is: www.maine.gov/pfr/index.shtml

Department purpose
The Department of Professional and Financial Regulation serves the public by regulating: state-chartered banks and credit unions, and bank holding companies; insurance companies, agencies and producers; grantors and collectors of consumer credit; investment providers; and more than forty (40) professions and occupations. The Department protects Maine consumers through its licensing, examination and regulatory activities: by conducting programs aimed at increasing voluntary compliance with State laws; by investigating possible violations of law; and by undertaking enforcement actions. The Department also responds to consumer complaints and requests for information, and conducts educational and outreach programs to make the public aware of their rights and responsibilities under Maine law. The Department is committed to competent, impartial and efficient regulation to foster the development of healthy, law-abiding and financially-sound businesses.

Department evolution
The Department was created as the Department of Business Regulation in 1973, as part of a reorganization of State government designed to consolidate related agencies along functional lines and strengthen executive direction. The Department's name was changed to Professional and Financial Regulation in 1987. The Administrative Services Division, which is now part of the Commissioner's Office, was established by the Commissioner in 1974 to provide administrative support to the agencies within the Department.

The Special Session of the 106th Legislature established the Bureau of Consumer Credit Protection to enforce the Maine Consumer Credit Code, which became effective January 1, 1975. Effective January 1, 1996, the agency became known as the Office of Consumer Credit Regulation.

Four boards and commissions were transferred into the Department at the time of its creation in 1973. That number increased over the years through the transfer of existing boards and the creation of new ones. At the current time, over 40 professional and occupational licensing boards, commissions and registrations are within the Department's Office of Licensing and Registration, and six boards are affiliated with the Department.

On September 21, 2001, the Securities Division, formerly an organizational unit within the Bureau of Banking, became the stand-alone Office of Securities. The name of the Bureau of Banking was changed to the Bureau of Financial Institutions on January 1, 2002.

Organizational structure
The Department's administrative head is the Commissioner. The Commissioner's Office contains the Administrative Services and Information Systems Support units. There are two bureaus headed by superintendents; the Bureau of Financial Institutions and the Bureau of Insurance. The superintendents maintain regulatory authority within their respective areas, while the Commissioner retains administrative, personnel and budgetary authority and serves as the Department's policy liaison to the Governor. There are also three offices within the Department: the Office of Consumer Credit Regulation, the Office of Licensing and Registration and the Office of Securities. The Office of Consumer Credit Regulation regulates non-bank personal finance, and collection activities, and money transmission. The Office of Licensing and Registration provides administrative support to 35 regulatory boards and conducts 5 registration functions. The Office of Securities regulates the activities and operations of brokerage firms, investment advisers and securities issuers through licensing, examining, investigating and prosecuting violations. Six professional licensing boards are also ‘affiliated’ with the Department.

Size and composition
The Department is relatively small compared to other cabinet-level agencies, employing a total of 212 persons. Due to the complex nature of its regulatory activity, the Department has a high number of professional and technical employees, including attorneys, CPAs, actuaries, nurses and licensed inspectors. The Department employs approximately 47 financial examiners and professional regulatory board inspectors who work primarily in the field. The Department emphasizes continuing professional education, staff development and training. The Department has a highly motivated staff, dedicated to quality regulation and public service.

Fiscal
The Department is funded entirely from dedicated revenue sources. This means that each organizational unit within the Department is funded by a combination of examination fees, assessment fees, volume fees, license fees and filing fees, paid by the industries or individuals being regulated. The Department contributes substantial amounts to the General Fund through every agency's ‘STACAP’ (State Cost Allocation Plan) assessment as well as through the Office of Securities' registration and licensing fees.

Technology
The Department utilizes technology to the fullest extent to aid in its regulation of entities and individuals and to improve its communications with customers. The Department operates an advanced licensing database and remote communication services in addition to maintaining an Internet home page, which posts current rules and regulations, proposed legislation, hearing notices and announcements for the public. As of October 2000, the Department began accepting renewals of professional licenses via the Internet. A vast array of information, including application materials, can be downloaded from the home pages of most agencies. The Department continues to be committed to increasing the use of technology to process applications, complete forms, provide public information and handle consumer complaints.

The Information Systems Support unit maintains computer servers and services, writes specialized programs, supports and trains Department staff on personal computers and uniform software, and is the primary interface between the Department and the State's Bureau of Information Services.

External Environment

The Department regulates financial services companies, such as banks, credit unions, insurance companies, providers of consumer credit, and securities firms, as well as certain employers (e.g., self-insurers) and various occupations and professions. The Department has identified several key trends in the external environment that are affecting regulated industries and professions. These trends and external influences include:

General economic trends
The financial services industry and the occupations regulated by the Department are, for the most part, dependent upon Maine-based markets, and their success and growth are linked to the overall health of the Maine economy. Maine's economy rebounded slowly from the last recession, but finally, after three years, regained the number of jobs lost. In June 2004 Maine's unemployment was 4.1 percent, well-below the national average of 5.6 percent. The state continued to experience large job losses in manufacturing, however.

In 2003 business and financial operations occupations employed more than 18,000 persons in Maine. The Maine Department of Labor estimates that in the decade 2000-2010 employment in the insurance and banking sectors in Maine will remain relatively flat.

General demographic trends
The most significant demographic trend in the U.S. is the aging of the population, as the so-called ‘baby boom’ generation moves through its life cycle. This trend has significant implications for the product mix of the financial services industry. As the population ages, consumer demand will increase for savings and investment products, such as certificates of deposit, mutual funds, annuities, retirement accounts and securities, while demand for loan products by baby boomers should abate.

The aging trend is affecting Maine far more than most states. Maine currently has the third oldest population, behind only West Virginia and Florida, and that population is aging much more rapidly than the national average.

These trends have several implications for the Department. As demand for investment products increases, the number of licensees and company licenses will likely increase as well. Demand will encourage product innovation in the financial services industry, creating new and more complex consumer disclosure and protection issues for the public. Educating consumers about new financial service products and protecting them from increased risk will likely challenge financial service regulators in the years to come.

Federal Preemption of State Regulatory Authority
The jurisdiction of state regulatory authority over financial services has been continually eroded in recent years and today remains under constant threat of further federal preemption. In a series of court challenges, federal banking regulators have succeeded in exempting national banks and their operating subsidiaries from state laws. In the areas of securities regulation and consumer credit, states have been forced to vigorously defend their jurisdiction. And in the area of insurance regulation, which traditionally has been regulated at the state level, a titanic battle is emerging. A number of industry associations and national insurers are urging Congress to preempt state oversight or create a dual system of optional state regulation that would vastly reduce the authority of states to regulate insurers.

Industry consolidation
The financial services industry, much of which is regulated by the Department, has undergone a period of modest consolidation and homogenization, which is taking several distinct forms. Consolidation among firms within specific industry sectors will continue at a modest rate during the next several years and will be evident throughout the financial services industry. Nationwide, interstate branching has resulted in some consolidation of subsidiary banks into multi-bank holding companies, but, more importantly, recent federal legislation will encourage the acquisition of smaller banks, and securities companies by larger, regional and super-regional bank holding companies. Consolidation will also occur in the insurance and securities industries, although it may be less significant as these industries have historically not been subject to the geographic restrictions common to the banking industry. With the passage of the Gramm-Leach-Bliley Act of 1999, the financial services industry was substantially modernized by Congress, and this Act was expected to promote greater consolidation among separate industry segments since insurance companies, banks and securities dealers are offering many similar products that were once the exclusive domain of single industries. The expected convergence of the sectors has not occurred as anticipated.

As state and federal regulators become increasingly risk-focused, significant procedural and/or structural changes in the organization and functions of state and federal agencies regulating the various components of the financial services industry are inevitable.

Consumer Protection and Regulatory Burden
The business community in Maine as in much of the country is sensitive to the burdens of regulation. Small businesses, in particular, are concerned about coping with regulatory requirements. As a regulatory agency, the department has a dual responsibility to protect the public while at the same time ensuring the solvency of Maine insurers and the stability of the state's financial institutions. The department recognizes that the public has a vital interest in both strong consumer protections and a competitive market for financial services and insurance products. Maine citizens expect the state to protect their consumer rights, while creating conditions that attract business to Maine and promote economic growth. The department's goal is to develop and administer policies that balance these interests.

Technology
In many respects, the rate of change experienced by regulated businesses is dictated by the impact of technology on the business and/or its customers. Improved telecommunications, access to the Internet and utilization of advanced computer technology in design, production and control functions have radically altered not only how a company does business, but also the products and services it offers and the scope of the markets it serves. Technological improvements in the regulated industries are often a compelling impetus in the rate of technological change at regulatory agencies. It is also becoming increasingly critical for regulatory agencies to keep abreast of these technological changes, and to hire and retain technology-savvy employees who can effectively and efficiently examine and regulate these industries.

Consumer trends
Consumers are now exhibiting a greater desire for accessibility to services, driven by more active lifestyles and increased work hours for most adult members of the family. Businesses are striving to make services more convenient and accessible. Likewise, regulators must also be responsive to the needs of business and consumer customers. License information, application forms, consumer educational materials and complaint resolution information is being increasingly made available by regulatory agencies through the Internet and other electronic means. In conducting its regulatory activities, the Department"s reliance on the Internet, digital signatures and other technologies is expected to increase.

The Department's functions of providing public information and protection will remain essential with the changing demography of Maine's population, the development of more complex services and automated delivery systems as well as increased competition, particularly in the financial services sector. Consumers evaluating and utilizing these new financial services will continue to value and rely upon the Department's role of screening company product offerings and resolving any complaints that may subsequently arise.

Bureau of Financial Institutions

Performance Measures

Office of Securities

Performance Measures

Office of the Commissioner

Performance Measures

Office of Consumer Credit Regulation

Performance Measures

Bureau of Insurance

Performance measures

Office of Licensing and Registration

Performance Measures

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