Federal Preemption in Securities Laws, the Investment Contract, and Macroprudential Financial Regulation
In the United States, the registration and offering of securities are regulated at both the state and federal levels. Due to the inefficiencies of this system, many have argued that federal securities laws should expressly preempt state registration of securities. We agree that a more uniform federal securities regulation structure is needed both for economic efficiency as well as to focus our national securities regulation on systemic, or macroprudential, financial risk. However, we argue that an in order to create such a structure, the term "security" is needs to be redefined. The breadth and uncertainty of the current definition, largely because of the catch-all term "investment contract," makes creating a sufficiently uniform system of federal preemption difficult, if not impossible, and provides too much uncertainty to issuers. This article discusses how this current broad definition is no longer necessary at the federal level and provides recommendations for how the federal definition of "security" can be revised to better equip our nation's securities laws to regulate the modern investing environment and monitor systemic risk.
Justin Blount & Drew Thornley, "Federal Preemption in Securities Laws, the Investment Contract, and Macroprudential Financial Regulation" (2016) 14:3 DePaul Bus & Comm LJ 273.
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