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Series 63 practice questionhardFederal/State Coordination — Blue Sky Laws vs Federal

A state enacts a new securities law that requires all issuers, including those offering federal covered securities, to obtain merit-based approval from the state Administrator before selling in the state. Under NSMIA, this state law is:

  1. AValid, because states have plenary power over securities sold within their borders
  2. BValid, because NSMIA only applies to broker-dealer registration
  3. CPreempted by federal law to the extent it requires registration or merit review of federal covered securities✓ Correct answer
  4. DValid, but only for securities not listed on a national exchange
Explanation

Why C — Preempted by federal law to the extent it requires registration or merit review of federal covered securities

Under NSMIA, states are preempted from imposing registration or qualification requirements, including merit-based review, on federal covered securities. Any state law that attempts to require merit approval of federal covered securities exceeds the authority preserved to states under NSMIA. States may only require notice filings, fees, and retain antifraud authority.

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