state vs federal

What did NSMIA (1996) do to state vs. federal authority?

Divided regulatory authority to eliminate duplication. Created FEDERAL COVERED ADVISERS and FEDERAL COVERED SECURITIES, over which states have only limited power (notice filing, fees, antifraud) — NOT registration. Drew the federal/state line.

IA registration — state vs. SEC by AUM?

Under $100M = STATE. $100M–$110M = adviser's CHOICE (buffer). $110M+ = SEC (federal covered). Drops below $90M = back to state. The buffer prevents constant switching.

When must an IA register with the SEC regardless of AUM?

Adviser to a registered investment company (mutual fund), pension consultant with $200M+ in plan assets, adviser required to register in 15+ states, or an adviser whose home state has no IA statute / doesn't examine advisers.

What can a state require of a FEDERAL COVERED adviser or security?

Only a NOTICE FILING, FILING FEES, and ANTIFRAUD enforcement. NOT substantive registration — NSMIA preempts state registration of federal covered advisers/securities.

Where do IARs register — state or federal?

IARs ALWAYS register at the STATE level, NEVER the SEC — even IARs of federal covered advisers (who register in states where they have a place of business). There is no federal IAR registration.

Can the state Administrator impose criminal penalties?

NO — only the courts can impose criminal penalties/jail. The Administrator refers criminal matters for prosecution. The Administrator CAN issue cease-and-desist orders, deny/suspend/revoke registrations, investigate, and enforce antifraud.

When does the Administrator have jurisdiction over an offer?

When the offer is ORIGINATED IN, DIRECTED INTO, or ACCEPTED IN the state — any one triggers jurisdiction. NOT for offers from a bona fide out-of-state newspaper or an out-of-state TV/radio broadcast.

What is the universal rule that applies to everyone — state, federal, exempt, excluded?

ANTIFRAUD. The antifraud provisions apply to ALL persons regardless of registration status. Both the SEC and the state Administrator always retain antifraud authority. No exemption or exclusion escapes antifraud.

Federal covered securities — name the main ones.

Exchange-listed securities (NYSE/Nasdaq) and those equal/senior to them, investment company shares registered under the 1940 Act, securities sold to qualified purchasers, and certain Reg D Rule 506 offerings. States can't require registration of these.

State securities registration methods?

Coordination (simultaneous with SEC — most IPOs), qualification (state-only/intrastate, most demanding), and notification/filing (established/seasoned issuers). Used for securities that are neither federal covered nor exempt.