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Background on the National Securities Markets Improvement Act of 1996As you know, when Congress adopted the National Securities Markets Improvement Actof 1996 (“NSMIA”)
it eliminated the duplicative system of federal and state regulation of securities offerings that had existed since the enactment of the 1933 Act by providing for federalpreemption of state registration and review of transactions involving,
securities offeredpursuant to Regulation D.In the
Joint Explanatory Statement of the Committee on Conference
the House and Senate managers (the “Managers”), including yourself, noted that:“The development and growth of the nation's capital markets has prompted theCongress to examine the need for legislation modernizing and rationalizing ourscheme of securities regulation to promote investment, decrease the cost of capital, and encourage competition. The Managers have sought to achieve thesegoals while also advancing the historic commitment of the securities laws topromoting the protection of investors. In particular, the system of dual Federaland state securities regulation has resulted in a degree of duplicative andunnecessary regulation. Securities offerings and the brokers and dealers engagedin securities transactions are all currently subject to a dual system of regulationthat, in many instances, is redundant, costly, and ineffective.. . .“The Managers have sought to eliminate duplicative and unnecessary regulatoryburdens while preserving important investor protections by reallocatingresponsibility over the regulation of the nation's securities markets in a morelogical fashion between the Federal government and the states.”
Discussion of Draft Section 928If the Draft Bill is enacted with Section 928 intact, Congress will make the capital raisingprocess even more difficult for companies of all sizes who are in need of funds following therecent financial crisis. Specifically, if states are no longer preempted from regulating theRegulation D private placements, a company that seeks to raise capital pursuant to Regulation Dwill need to obtain pre-review by and pre-approval from each individual state in which potentialinvestors reside who may be interested in investing in the company’s securities. Unlike today’snotice filing process for Regulation D offerings, this could mean a substantive review state-by-
Pub. L. 104-290, 110 Stat. 3416 (Oct. 11, 1996).
. 104-864 (1996) (Conf. Rep.), available athttp://thomas.loc.gov/cgi-bin/cpquery/?&sid=cp104xbGcm&refer=&r_n=hr864.104&db_id=104&item=&sel=TOC_120433&.