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Difficulty: MediumState Securities Regulators and Blue Sky Laws

Under the National Securities Markets Improvement Act (NSMIA) and state Blue Sky laws, federal covered securities are exempt from state registration procedures. Which of the following powers is explicitly retained by state securities Administrators regarding federal covered securities?

  1. Enforcing anti-fraud provisions and investigating deceptive practices conducted within the stateAnswer
  2. B
    Conducting full merit reviews of exchange-listed stock offerings prior to retail sales
  3. C
    Revoking federal SEC registration statements through SRO disciplinary committees
  4. D
    Requiring state registration by qualification for open-end investment company shares

Answer

Enforcing anti-fraud provisions and investigating deceptive practices conducted within the state
While NSMIA preempts states from requiring state-level registration or conducting merit reviews of federal covered securities (such as exchange-listed equities and mutual funds), state securities Administrators explicitly retain full authority to investigate and enforce anti-fraud statutes against fraudulent or deceptive activities taking place within their state borders.

Step-by-Step Solution

1
Identify the regulatory scope established by NSMIA for federal covered securities.
NSMIA eliminated dual federal-state registration by preempting state registration requirements and merit reviews for covered securities.
Congress enacted NSMIA to streamline securities regulation and eliminate redundant state registration requirements for nationally traded securities.
2
Determine the retained powers of state securities Administrators under Blue Sky laws.
State Administrators retain authority to collect notice filing fees, require consent to service of process, and enforce anti-fraud provisions.
While state registration requirements are preempted, state Administrators preserve complete jurisdiction to investigate and prosecute fraudulent activities within their borders.

Key Concept

Retained State Anti-Fraud Authority Under NSMIA
Estimated Time:1m 15s
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Topics

State Securities Regulators and Blue Sky Laws

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