Federal Covered Securities, for the most part mutual funds, are no longer required to register in Alaska. However, in an attempt to have a revenue neutral impact on the states and to preserve local investor protection, congress allowed the states to require Notice filings and fees. NSMIA provides a three-year window for the states to amend their statutes to provide for notice filings and notice fees or lose the authority to require them. Without this legislation by October 1999, Alaska would lose between $4-5 million in annual revenue funds for the purpose of investor protection. Over 40 states already have passed similar legislation.

NSMIA also altered the registration and regulation of investment advisers. Investment advisers were previously registered with the Securities and Exchange Commission (SEC) and each state in which they offered their services. NSMIA created two kinds of advisers: Federal Covered Advisers, those who manage assets in excess of $25-30 million, must register with the SEC; and State Investment Advisers (SIA) that must register with the states. States may require Federal Covered Advisers to file a notice and pay a notice fee in order to provide services in the state. Although Federal Covered Advisers are exempt from registration, the states retain regulatory authority over them for violations of the anti-fraud provisions of state law. Finally, NSMIA allows the states to require registration of the representatives of Federal Covered Advisers, who actually provide the investment advice, if they have a place of business in the state.

The changes in federal law require significant amendments to the Alaska Securities Act. These amendments must provide for Federal Covered Securities, Federal Covered Advisers, Investment Adviser Representatives, and Notices and Notice fees. Provisions must also be added to specify fraudulent and unethical behavior that may lead to action not only against a registered person but now, also against a person who filed a Notice in Alaska. Language for the amendments was, for the most part, drafted by the North American Securities Administrators Association (NASAA), an organization of state securities regulators (members also include Mexico and the provinces of Canada). Division staff also worked with industry in developing this legislation. The Investment Company Institute (representing the mutual fund industry), the Investment Counsel Association of America, Inc. (representing the investment adviser industry), and the Institute of Certified Financial Planners (representing about 14,000 CFP licensees in the United States, including 16 in Alaska) have provided written support for the legislation. In addition to NSMIA changes, other proposed amendments would improve access to the capital market without weakening investor protection.

This legislation is essential to continue the State's ability to collect between $4-$5 million in fee income and to provide investor protection to Alaska investors who use the services of broker/dealers or investment advisers. Without this legislation, State Investment Advisers essentially would be unregulated, since they are no longer registered with the Securities and Exchange Commission. Not only is time of the essence, but we believe the NSMIA amendments and the other improvements described above will improve investor protection and issuer access to capital.