1.2 State Regulation

What are blue sky laws

State level securities regulations designed to protect investors from fraud

What is a State Securities Administrator?

Each state has one, they enforce that states blue sky laws

Responsibilities of a State Securities Administrator

Registration - review and approve securities offerings in the state

licensing - register broker dealers, agents, investment advisors, and their representatives

enforcement - investigate fraud and take action against violators

investor education

What can state securities administrators do?

Deny/suspend/revoke registrations and licenses

Issue cease and desist orders to stop illegal activity

Impose fines and other penalties

Refer cases to state attorney general for criminal prosecution

What is the NASAA

North American Securities Administrators Association

What does NASAA do?

Develop model rules that states can adopt for consistency

Creates uniform exams like Series 63, 65, and 66

Coordinates enforcement across state lines

Advocates for investor protection at the federal level

The 3 versions of the Uniform Securities act

U.S.A. of 1956

U.S.A. of 1985

U.S.A. of 2002

The 3 methods of state registration for securities

Coordination, Qualification, Notice Filing

Coordination description and common use

Filed simultaneously with federal registration

For IPOs and public offerings

Qualification description and common use

Full state review process

For offerings not registered federally

Notice filing description and common use

Simplified notification to the state

For Federal covered securities

Where must broker dealers register?

In each state where they have an office or conduct business

Where must agents (registered representatives) register?

in states where they sell securities

Where must investment advisors register?

either with the SEC or their home state, depending on assets under management

Where must advisor representatives register?

typically at state level

What is the NSMIA

National Securities Markets Improvement Act of 1996

What does NSMIA do?

limits state authority over certain federal covered securities and advisers, preventing duplicative regulation

Under NSMIA, states cannot require registration for

Securities listed on national exchanges

Securities issued by investment companies (mutual funds)

Securities sold to qualified purchasers

Securities in certain exempt transactions

What is the AUM threshold requiring SEC registration?

100 million or more

Even when an advisor has to register with SEC, states retain

Authority to require notice filings and fees

Anti fraud enforcement powers

Registration authority over investment adviser representatives