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It started with the National Securities Markets Improvement Act of 1996 (lovingly known as “NSMIA” pronounced “nissmeeya”). That law said federal SEC oversight of public offerings on the major national exchanges is sufficient and the states do not also need to review, weigh in, and frankly more often than not delay and frustrate the process. Unfortunately OTC companies remained stuck with full state “blue sky” review of public offerings.
Then came the Jumpstart Our Business Startups (JOBS) Act of 2012 (way better acronym btw). Here in improving Regulation A to allow larger offerings than before but maintain more scaled disclosure and reporting, Congress said state review is preempted to sales to qualified purchasers. So far the SEC proposes to allow all investors to be qualified so long as the disclosure meets SEC standards. And just last week the SEC Advisory Committee on Emerging Companies appeared to have rejected efforts by the states to scale that back somehow.
But really we should ask Congress to do what they almost did in drafting NSMIA, namely preempt state review of all public offerings. There is really no unique individual state interest that is not fully protected by our very capable and hard-working SEC examiners. States would and should continue to play a role in enforcement and in the regulation of intermediaries and brokers. NSMIA, then JOBS started us down the slope (private offerings under Regulation D also are state preempted), so why not take the next logical step to make IPOs a more attractive option for smaller companies while maintaining strong investor protections at the fed level?
States do have rights, but not if Congress preempts those rights, and they should in this case. Maybe before 2016 gang?
Read additional articles at the David Feldman Blog.
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