NCPA - National Center for Policy Analysis

Should Congress Pre-Empt States' Securities Laws?

August 1, 1997

The state treasurer of Ohio is urging Congress to enact a uniform code of securities laws, contending that different laws in each of the 50 states and the District of Columbia are hampering distribution of information by publicly-held companies.

  • In 1995, Congress passed legislation which attempted to bar meritless class-action suits from federal courts -- prompting plaintiffs' attorneys to start filing in state courts.
  • Experts estimate that more than one-quarter of securities class actions were shifted to state courts last year.
  • Observers say that companies mulling how to share information with investors must tie their decisions to the most onerous state laws -- effectively limiting the data available to investors in all states.
  • Proponents of national standards contend that such a move would not violate constitutional principles of federalism by taking reserved powers from the states.

They argue that the Constitution's commerce clause empowers Congress to enact uniform national rules to pre-empt state laws that interfere excessively with the national economy.

Source: J. Kenneth Blackwell (Treasurer of Ohio), "Investors Still Face Threat of Lawsuit Abuse," Investor's Business Daily, August 1, 1997.


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