The National Securities Markets Improvement Act of 1996 is an amendment to United States federal securities laws in with the aim of promote efficiency and capital formation in the financial markets, and to amend the Investment Company Act of 1940 to promote more efficient management of mutual funds, protect investors, and provide more effective and less burdensome regulation between states and the Federal Government.
The law made substantial changes to the competing systems of securities regulation at the state and federal level.
[1] One of its provisions declares that any offering of a "covered security" (as defined within the act) is exempt from state registration and review.
In effect, the NSMIA gave the SEC exclusive jurisdiction to regulate securities firms.
In addition, NSMIA added new section 3(c)(7) of the Investment Company Act to create an alternative exclusion for investment companies that sell their securities solely to investors who are "qualified purchasers".