1 Kan. L. 1911 Ch. 133.
2 Ibid §5. See generally 1 Louis Loss & Joel Seligman, Securities Regulation, 3d ed. (1998) at 36-40.
3 Mulvey, “Blue Sky Law” (1916) 36 Can. L. Times 27.
4 Hall v. Geiger-Jones Co., 242 U.S. 539 (1917); Caldwell v. Sioux Falls Stock Yards Co., 242 U.S. 559 (1917); Merrick v. N.W. Halsey & Co., 242 U.S. 568 (1917).
5 Loss & Seligman, supra note 2 at 34-35, 40.
6 Ibid at 146-147.
7 Ibid at 147-150.
8 Ibid at 150.
9 Sec. Act §3(a)(11).
10 See generally Loss & Seligman, supra note 2 at 275-281.
11 Ibid at 108-110.
12 See generally Joel Seligman, “The Obsolescence of Wall Street: A Contextual Approach to the Evolving Structure of Federal Securities Regulation” (1995) 93 Mich. L. Rev. 649 at 673-682.
13 Ibid at 678.
14 There were by then two patterns of merit regulation. First, generic rules aimed at regulating such practices as “cheap stock” or excessive options. Second, specific guidelines regulating industries such as real estate or oil and gas. For a 1986 review of the debate concerning merit regulation, see ABA Ad Hoc Subcomm. on Merit Reg., “Report on State Merit Regulation of Securities Offerings” (1986) 41 Bus. Law 785.
15 Seligman, supra note 12, at 681.
17 See Hensley, “The Development of a Revised Uniform Securities Act” (1985) 40 Bus. Law. 721; Sargent, “Some Thoughts on the Revised Uniform Securities Act” (1986) 14 Sec. Reg. L.J. 62; Hensley, “The Revised Uniform Securities Act – The Debate Continues” (1988) 43 Bus. Law. 765; Sargent, “RUSA Revisited” (1989) 17 Sec. Reg. L.J. 79.
18 SEC, Ann. Rep. 178 (2002). The Nasdaq market was smaller with a capitalization of $2.9 trillion in 2001, see SIA, Securities Industry Fact Book (2002) at 48; mutual funds, which are covered securities under §18(b)(2) added another $3.4 trillion in equity assets in 2001. Ibid at 59. Exempt securities, some of which would be noncovered, are smaller in aggregate capitalization. In 2001, for example, there were 2,868 private placements in the United States with a total capitalization of $581.2 billion. Ibid at 13.
19 Title II of the National Securities Markets Improvement Act amended the Investment Company Act to address:
(1) funds of funds in §12(d)(1);
(2) the registration of indefinite amounts of securities in §24(f);
(3) the facilitation of current information in advertising, see new §24(g);
(4) variable insurance contracts, see new §§26(e) and 27(i);
(5) reports to the Commission and shareholders, §30;
(6) books, records, and inspections, §31;
(7) prohibition of deceptive investment company names, §35(d); and
(8) amendments to definitions, see §3(c), new §2(a)(51(A) (“qualified purchases”).
20 See Sec. Act §§16(a), 18; Sec. Exch. Act §28(a); Inv. Adv. Act §222; Inv. Co. Act §50.
21 Sec. Act §19(c)(1).
22 Sec. Act §19(c)(2)(B).
23 Sec. Act §19(c)(3).
24 Section 608(c) provides in detail:
The cooperation, coordination, consultation, and sharing of records and information authorized by this section includes:
(1) establishing or employing one or more designees as a central depository for registration and notice filings under this [Act] and for records required or allowed to be maintained under this [Act]:
(2) developing and maintaining uniform forms;
(3) conducting a joint examination or investigation;
(4) holding a joint administrative hearing;
(5) instituting and prosecuting a joint civil or administrative proceeding;
(6) sharing and exchanging personnel;
(7) coordinating registrations under Sections 301 and 401 through 404 and exemptions under Section 203;
(8) sharing and exchanging records, subject to Section 607;
(9) formulating rules, statements of policy, guidelines, forms, and interpretative opinions and releases;
(10) formulating common systems and procedures;
(11) notifying the public of proposed rules, forms, statements of policy, and guidelines;
(12) attending conferences and other meetings among securities regulators, which may include representatives of governmental and private sector organizations involved in capital formation, deemed necessary or appropriate to promote or achieve uniformity; and
(13) developing and maintaining a uniform exemption from registration for small issuers, and taking other steps to reduce the burden of raising investment capital by small businesses.
25 See Loss & Seligman, supra note 2 at 46 n46. In April 2003 the Commission and NASAA met to discuss a jointly developed agenda that included:
(1) Corporation Finance issues including eight new SEC rules to implement the Sarbanes-Oxley Act and including particular issues raised by smaller issuers; transactions involving “qualified purchasers”; the Regulation A securities exception; Form D; and blank check securities;
(2) Market Regulation issues including bank-dealer exemptions from the securities laws; possible revisions to Form BD; research analyst conflicts of interest; settlement cycles and processing; IPO underwriting and allocation; CRD expungement; New York Stock Exchange proposals to redefine branch offices and supervisory systems; recent amendments to broker-dealer recordkeeping rules; and examination issues; and
(3) Investment Management issues including electronic filing in the IARD and examination of investment advisers. Sec. Act Rel. 8207, 79 SEC Dock. 2352 (2003).
26 Sec. Ex. Act Rel. 44,992, 76 SEC Dock. 343, 347 (2001).
27 Joel Seligman, The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance, 3d ed. (2003) at 674-681.
28 CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 78-79 (1987).
29 10 Louis Loss & Joel Seligman, Securities Regulation, 3d ed. (1996) at 4636-4669; Louis Loss & Joel Seligman, Securities Regulation (2003 Ann. Supp.) 29-38.
30 Sec. Act §18(c)(1).
31 See data in Loss & Seligman, supra note 2 at 147-150.
32 “Merrill Lynch, Spitzer Reach Interim Deal; New Securities
Research Disclosures Ordered” (2002)
34 Sec. Reg. & L. Rep. (BNA) 647.
33 See Seligman, supra note 27 at 648.
34 “Wall Street Agrees to $1.4 Billion Payment, Broad Reforms,
Resolving Conflict Charges” (2002)
34 Sec. Reg. & L. Rep. (BNA) 2037.
35 SEC Press Rel. 2003-54 (Apr. 28, 2003). Subsequently, H.R. 2719 was introduced in the United States House of Representatives to require states in specified circumstances to remit to the SEC penalties and disgorgement obtained in state actions for distribution to investors and to prevent securities law violators from shielding property from the SEC under state homestead laws. NASAA President Christine Bruenn testified on June 5, 2003 that she anticipated that NASAA would be able to work with the SEC and the House Subcommittee to address concerns about the Bill. It is uncertain whether the Bill will be enacted. “Lawmakers, Witnesses at House Hearing Anticipate Resolution of States’ Rights Issues” (2003) 35 Sec. Reg. & L. Rep. (BNA) 952. In July 2003 a similar controversy arose when a House subcommittee approved a Bill that would limit state rulemaking with respect to research analysts’ conflicts of interest. “States, Intent on Regulating, Look at Morgan” N.Y. Times (July 15, 2003) C1. It is uncertain whether this Bill will be adopted by Congress. “Solomon & Smith, Donaldson Asserts SEC Authority on Markets” Wall St. J. (July 16, 2003) C1.
36 Sec. Act Rel. 8041, 76 SEC Dock. 1035 (2001) (proposal); NASAA Comment Letter, NASAA Rep. ¶13,095 (Mar. 4, 2002).
37 SEC Rep., Uniformity of State Securities Requirements for Offerings of Securities that Are Not Covered Securities (1997), summarized in Loss & Seligman, supra note 29 at 23-26.
38 Cf. Sec. Act §19(c)(2)(B)-(C); Unif. Sec. Act (2002) §608(b)(1) & (3).
39 Cf. Unif. Sec. Act (1956) §415; Unif. Sec. Act (2002) §608(a).
40 See NASAA Rep. ¶¶351-3841.
41 Sec. Act §18(b)(4)(D). Rule 506 is a qualified exemption from the securities registration requirements of the Securities Act of 1933 and is part of Regulation D (which includes Rules 501-508 under the Securities Act of 1933). To qualify for the Rule 506 exemption, there are specified disclosure requirements. The states did adopt a parallel Uniform Limited Offering Exemption (ULOE). But there was disappointment on the part of some securities issuers when additional disclosure requirements were added for some states.
42 I am, however, unaware of cost-benefit studies relating to concurrent state and federal regulation.
43 See supra notes 9-12 and accompanying text.