Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, October 2, 2011

Campbell on Regulation of Capital Formation Activities

Federalism Gone Amuck: The Case for Reallocating Governmental Authority Over the Capital Formation Activities of Businesses, by Rutheford B. Campbell Jr., University of Kentucky - College of Law, was recently posted on SSRN.  Here is the abstract:

This essay, published in connection with the 100th anniversary of the Kansas Blue Sky Law, offers arguments in favor of a significant reallocation of governmental authority over the capital formation activities of businesses.

The essay argues that the present system of dual, federal-state control over capital formation is not in the best interests of the citizens that state and federal rulemakers and regulators are obligated to serve. The system is out of balance for a market economy such as ours, due principally to a misallocation of state resources in support of state rules requiring the registration of securities.

The solution for this problem is the elimination all of state authority over the registration of securities and the reallocation of state resources to the enforcement of state antifraud provisions.

This solution requires both state and federal regulators to alter their past conduct. State regulators must abandon the vigorous and pernicious fight they have waged in their effort to maintain their authority over the registration of securities and, instead, work to achieve a reallocation of scarce state resources to their most efficient use, which is the support of states’ enforcement of their antifraud provisions. The Securities and Exchange Commission must abandon its hands-off approach with regard to state authority over registration and use its best efforts to achieve a single, national system regarding the registration of securities.

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