National Securities Markets Improvement Act - NSMIA
Categories: Trading, Incorporation, Investing, Stocks, Bonds, Managed Funds
Dateline: 1996. The enactment took away a lot of the bureaucracy between and among state and federal financial laws, which were sometimes in conflict and often redundant, repetitive, requiring the same thing over and over and over and over again. This act streamlined things and saved trees from the MulchMonster.
So it's 1996. What’s going on in the world? One thing: the internet. Everything is getting wired, and not just on Espresso. Computers everywhere are talking to each other.
With massive structural change in the way in which people do business, 1996 brought about the advent of myriad new securities laws, which were needed as an update or sequel to the Acts in the 1930s and 1940.
One key change in this era was that borders among investors evaporated. Afghanistan was as close by as Peoria when it came to a click on an investor keyboard sitting in their office at home. The notion of borders among states, which was already vague, became infinitely opaque, and essentially any covered security, i.e. an investment made in any element of the public realm became by default a kind of nationally registered security, rather than something that only had to follow the rules of one state or another.
The SEC, the national organization for managing securities laws, took control over virtually all securities laws, and striated the rules so that they were more granular.
What does all this mean?
Well, it means that the investing world was becoming the wild wild west again, only it had the dot-com extension on the end of it. The broader goal here was to simplify rules as much as possible, without impinging on the liquidity of investors wanting to invest, you know, in their underwear.
In practice, the state-centric blue sky laws were transferred to the Federal government in the form of the SEC to promote fairness in dealing. Specific provisions of the law defined which "covered" securities are exempt from state regulations. These include any securities traded on national exchanges, such as the Nasdaq, and the New York Stock Exchange, as well as mutual fund shares.
Bottom line? The world is getting smaller. The notion of local securities laws is kind of going away, and everyone is a fan of that whole underwear investing thing.