National Securities Markets Improvement Act (NSMIA)

The National Securities Markets Improvement Act (NSMIA) was signed into law by President Bill Clinton on October 11, 1996. The law was intended to modernize the regulation of the securities industry and promote competition among securities firms.

NSMIA accomplished several things. First, it repealed the Glass-Steagall Act of 1933, which had separated commercial banking from investment banking. This allowed banks to engage in a wider range of activities, such as underwriting securities and providing investment advice.

Second, NSMIA created the Securities and Exchange Commission (SEC) as the primary regulator of the securities industry. The SEC was given new powers to oversee the activities of securities firms, including the power to conduct examinations, issue orders, and impose sanctions.

Third, NSMIA established a new self-regulatory organization (SRO) for the over-the-counter (OTC) market. The SRO, known as the Financial Industry Regulatory Authority (FINRA), was given the authority to regulate the activities of broker-dealers that trade in OTC securities.

NSMIA has been praised by some for its efforts to modernize the regulation of the securities industry. However, it has also been criticized by others for its potential to increase conflicts of interest and for its failure to address the problem of systemic risk.

Overall, NSMIA was a significant piece of legislation that had a major impact on the regulation of the securities industry. The law remains in effect today and continues to shape the way that the securities industry operates.