Federal covered securities are exempt from State registration.

"Federal covered security" means a security that is, or upon completion of a transaction will be, a covered security under Section 18(b) of the Securities Act of 1933..."

On its own, this isn't a very helpful definition (from the 2002 USA) for folks who aren't lawyers or securities law professionals. More useful are the official comments that are a part of that Law's documentation:

"The National Securities Markets Improvement Act of 1996, as subsequently amended, partially preempted state law in the securities offering and reporting areas...

Section 18(b) of the Securities Act of 1933 applies to four types of "covered securities":
    1. Securities listed or authorized for listing on the New York Stock Exchange (NYSE), the American Stock Exchange (Amex);  the Nasdaq stock market; ...
    2. securities issued by an investment company registered with the SEC (or one that has filed a registration statement under the Investment Company Act of 1940)"

Adding to this list, the Official Comments accompanying the USA of 2002 state that:

Under Rule 146 the SEC has designated as federal-covered securities under Section 18(b)(1) Tier I of the Pacific Exchange; Tier I of the Philadelphia Stock Exchange; and The Chicago Board Options Exchange on condition that the relevant listing standards continue to be substantially similar to those of the New York, American, or Nasdaq stock markets..."

Okay, what does all of this really mean? (You don't have to know that rule number, or what Tier I represents, by the way). The basic concept is that if the issuer of a security - the corporation - has achieved a level of financial strength and stability sufficient for listing on one of the exchanges or quotation in the NASDAQ  system, there is no need to have it examined by and registered again with the state. This is one of the major securities market simplification thrusts of NSMIA - the elimination of repetitive and duplicate registration.

Introduction

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