Analysis

Topic: Michigan Uniform Securities Act
Sponsor: Representative Richner
Committee: Family and Civil Law
Date Introduced: May 10, 2000
Date of Analysis: May 26, 2000

Position: The Department of Consumer and Industry Services and the Office of Financial and Insurance Services support the bill.

Problem/Background: The State of Michigan is not currently in conformity with federal securities law. The bill would bring Michigan securities law into conformity with federal requirements that were mandated in 1996, the result of the National Securities Markets Improvement Act ("NSMIA"). This federal Act created a bifurcated review system for securities investment advisers. All investment advisers with less than $25,000,000 of assets under management are now under the exclusive regulatory authority of the state securities regulators. Other provisions of NSMIA established uniform books and records and bonding requirements for investment advisers and broker-dealers. State securities law was preempted in such areas as mutual fund regulation and certain private securities transactions.

Description of Bill: The bill would bring the Michigan Uniform Securities Act into conformity with federal legislation that occurred through passage of NSMIA in 1996. The sections of the Act that need to be revised to bring Michigan securities law into conformity with federal law include definitional changes recognizing federally covered adviser, federally covered security and exclusions from the definition of investment adviser. The bill also recognizes that state law has been preempted in certain areas regarding investment adviser and broker-dealer record keeping requirements. The bill creates certain notice filing procedures for the mutual fund industry and specific private securities offerings. The bill would also recognize limited liability companies as an eligible filer under the Michigan Uniform Securities Act's Small Company Offering Registration section.

Arguments For: This bill is needed to bring the Michigan Uniform Securities Act into conformity with the National Securities Markets Improvement Act of 1996. Michigan is reportedly the only state in the nation whose securities law has not been updated in response to the 1996 federal law.

Arguments Against: There is no need for this bill at this time. The federal law was amended in 1996, but there has been no great problem with securites regulation in Michigan. Federal securities law may be revised again within the next few years, and we will be required to do this again.

Fiscal Information: No fiscal impact on state and local government is expected. Discussions are reportedly underway with the mutual fund industry regarding the manner in which fees are calculated. However, it is anticipated that the resolution of these discussions will be revenue neutral.

Economic Impact: No economic impact is anticipated.

Administrative Rules Impact: Several administrative rules would have to be revised, rescinded or proposed as a result of the proposed legislation.