DEFINITION of 'National Securities Markets Improvement Act - NSMIA'

The National Securities Markets Improvement Act is a law passed in 1996 to simplify securities regulation in the U.S. by apportioning more regulatory power to the federal government.

BREAKING DOWN 'National Securities Markets Improvement Act - NSMIA'

The National Securities Markets Improvement Act (NSMIA) amended the Investment Company Act of 1940 and the Investment Advisers Act of 1940 and went into effect on Jan. 1, 1997. Its main consequence was to increase the authority of federal regulators at the expense of their state-level counterparts, a change that was expected to increase the efficiency of the financial services industry. 

Prior to the NSMIA, state-level Blue Sky laws, which were passed in order to protect retail investors from scams, were considerably more powerful. The NSMIA transferred most of this regulatory power to the federal government, particularly the Securities and Exchange Commission (SEC).

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. 

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