National Securities Markets Improvement Act
The National Securities Markets Improvement Act of 1996 (“NSMIA”) made substantial changes to the dual system of federal-state regulation while preserving state anti-fraud authority. For the first time since the New Deal, Congress modernized the relationship between federal and state securities regulators. Congress sought to make the SEC the regulator of nationally based activities, while preserving the role of states over activities that were truly local in nature. At the same time, NSMIA preserved the right of state regulators to prosecute fraud.
Registration of Securities -- Among other things, NSMIA preempts state registration and related requirements in the case of offerings of nationally traded securities and securities of registered investment companies. NSMIA amended Section 18 of the 1933 Act to provide that no state law requiring or, with respect to registration or qualification of securities or registration or qualification of securities transactions, shall directly or indirectly, apply to a “covered security.” Covered securities include the following:
- Nationally traded securities - for example, securities listed or authorized for listing on the NYSE or included or qualified for inclusion in Nasdaq;
- Securities of a registered investment company (i.e., mutual funds); and
- Offers and sales of certain exempt securities
Broker-Dealers -- NSMIA also preempted to a limited extent state laws that addressed broker-dealer licensing, capital, custody, financial responsibility, and record-keeping requirements to the extent such conflicts differed from SEC requirements. This provision, for example, avoided the nightmare that would have occurred if every state securities authority had imposed its own unique book and records requirement on brokerage firms operating in all 50 states.
Securities Litigation Uniform Standards Act Glass-Steagall Act