Regulators can seem like scary people, but financial advisors who take time to reach out to their state regulators could have an ally down the road in times of need.

That tidbit came from Joseph Borg, director of the Alabama Securities Commission and twice past president of the North American Securities Administration Association, who spoke Monday at the opening general session of the Financial Services Institute's OneVoice 2010 Broker-Dealer Conference in New Orleans. Borg spoke on a panel that focused on proposed financial services regulatory changes floating around in Congress.

Among the proposed changes is the call to raise the threshold that separates SEC- and state-registered investment advisors from $25 million to $100 million. If that goes through, more advisors would be examined by their respective state's securities regulatory body as the SEC focuses its resources on bigger fish.

"If you want an advantage in working with the states, get to know who you're going to deal with and make your presence known with state regulators," Borg said. "It's actually a relationship business. And the first time to do it shouldn't be when you have a problem."

The other panel members agreed.

Another thing they also agreed on is that despite the protean nature of the regulatory reform process, some of the more radical proposals will likely be dropped. But regulatory changes of some sort are likely.

"There's a sense around the country that a serious malfunction occurred, and like it or not Congress will be compelled to do something," said David DeMuro, an attorney with the law firm O'Melveny & Myers, who formerly was chief of global compliance and regulation at Lehman Brothers. "Something will come out of the Senate that's more bipartisan and Barney Frank (D-Mass., chairman of the House Financial Services Committee) will probably go along with it."

As for the prospect of state securities regulators playing a bigger role in examining investment advisors, panel moderator Neal Sullivan, co-chair of the securities practice at the law firm Bingham McCutchen, asked whether states have enough resources to support a heavier workload.

"Some yes, some no," Borg said. He offered a solution: States would need to share more resources. More important, he said, state securities regulators will need more funding. And he believes that stands a decent chance of happening.

"When it comes to state securities regulatory departments, in many states it's gone from 'We have that?' to 'What are you going to do to prevent the next [Bernard] Madoff," Borg said.

No matter what happens, Borg said, securities regulators of all stripes will need to coordinate their efforts and work more closely together.

"The lines of division have got to fall," he said.