In the legislative hearings leading to NSMIA, for example, the state regulators offered vigorous testimony against preemption, (43) and their effective lobby seems certain to have influenced the congressional committee considering NSMIA and ultimately Congress to limit significantly the broader legislative preemption provision initially proposed in the Capital Markets Deregulation and Liberalization Act.
notwithstanding a broad delegation of authority in NSMIA to the Commission to expand preemption through regulation.
undoubtedly simplified the regulatory interplay between the SEC and the states, but the de minimis standard is but one example of how the states can and have asserted their independent authority.
In rejecting the plaintiff's arguments, the court found that NSMIA still preempted state law and hence preempted the private cause of action under F.
The Sixth Circuit's opinion in the EarthBoard Sports case is the most important and persuasive to date because of its extensive consideration of the issue of preemption through NSMIA.
172) With respect to the question of whether NSMIA creates a far broader form of null preemption by precluding all qualification requirements, those who believe that qualification requirements do work separate from that done by disclosure requirements under federal law likely understand NSMIA to effect null preemption, and find it normatively undesirable.
243) And, if criticisms of preemption under the NSMIA are any guide, then the result may be more null preemption under the guise of duplicative regulation null preemption.
NSMIA eliminated the second part of the test (having more than 10% of the investor's assets invested in section 3(c)(1) funds generally) and amended the first part of the test (being a 10% + investor in a particular section 3(c)(1) fund) to apply only if the 10%+ investor is a registered or private fund excepted from the definition of investment company under sections 3(c)(1) or 3(c)(7).
In defining investments, the SEC was guided by the legislative history of NSMIA, which indicates that section 3(c)(7) funds should be limited to investors with a high degree of financial sophistication who appreciate the risks associated with private investment funds.
The CFTC must produce a cost-benefit analysis sufficient to support justification of its rules in accordance with NSMIA and the Administrative Procedure Act (APA).
145) Further, absent sufficient assessment of the costs of the rule, a proper cost-benefit analysis as mandated by the APA and NSMIA is not possible.
The second part of this article reviews NSMIA
and its preemptive effect on state regulation of private placements conducted in accordance with the federal safe harbor provided by Rule 506.