SEC Acting Chair Calls for Federal/State Regulatory Realignment
SEC Acting Chair Mark T. Uyeda called for a reassessment of the boundaries between federal and state securities regulators.
In an address before a joint NASAA and SEC Annual Conference on Federal and State Securities Cooperation, Acting Chair Uyeda identified two areas in need of reevaluation: (i) the oversight of mid-sized investment advisers and (ii) the scope of federal preemption in securities transactions.
On the oversight of mid-sized investment advisers, Mr. Uyeda stated that the current $100 million assets under management ("AUM") threshold—established by the Dodd-Frank Act to distinguish between SEC and state oversight—is "unbalanced." He emphasized that the number of investment advisers with $100 million to $1 billion in AUM has grown significantly since 2012. Mr. Uyeda called for a staff-led evaluation to determine whether the current split still aligns with "Congress's intent:" allowing the SEC to focus "on larger, more complex investment advisers" while states oversee smaller firms.
On the scope of federal preemption, Mr. Uyeda questioned whether the current federal preemption of state securities laws is "appropriately calibrated," particularly in complex scenarios outside of traditional IPOs. He cited instances where companies face duplicative or unclear "registration requirements" at both the federal and state levels. For example, he pointed out that state registration may still be required when a company registers a primary offering with the SEC, but does not list on a national exchange, or when secondary trading is federally registered yet still subject to state oversight. Mr. Uyeda questioned whether these requirements provide meaningful investor protection or, instead, hinder capital formation—particularly for small businesses. He proposed a model where companies might only need to satisfy the registration requirements of a "single state," such as their home state, in addition to federal rules. He emphasized that such changes could reduce regulatory friction while preserving investor protection.