Evaluating the Preemption Evidence: Have the Proponents Met Their Burden?

Abstract

Striking an appropriate balance between state and federal regulation of our securities markets is a difficult task. For more than sixty years, these markets have operated under a system of overlapping state and federal regulation. It is a system that has, for the most part, served investors well, and has contributed to our markets’ reputation as the fairest and most liquid in the world. While federal law is supreme in the area of securities regulation, it never has been the exclusive source of authority over market participants. State regulation of securities preceded federal regulation by more than twenty years. State legislatures began enacting laws regulating securities transactions early this century, and today every state has enacted a securities act. The federal securities laws were enacted in the 1930s in the wake of the market crash of 1929. With state law considered inadequate to address the widespread abuses that led to the crash, the federal securities laws were viewed as a supplement to, rather than a substitute for, state blue sky laws. Both the Securities Act of 1933