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Robert T. Hill

Abstract

This Comment evaluates the recent lawsuit filed by the Securities Industry and Financial Markets Association (SIFMA) against the Missouri Secretary of State, alleging violations of the National Securities Markets Improvement Act (NSMIA), Employee Retirement Income Security Act of 1974 (ERISA), and commercial free speech. NSMIA significantly altered the regulatory landscape by preempting certain aspects of state securities laws, aiming to streamline regulations and foster national uniformity in securities markets. However, this federal preemption presents a complex dilemma when addressing the surge in ESG investing, where investors prioritize financial returns and social and environmental impacts. Accordingly, this Comment examines the interplay between federal and state securities regulations and their implication on Environmental, Social, and Governance (ESG) investing in light of NSMIA. It delves into the tension between federal preemption and state autonomy, evaluating how NSMIA's preemptive measures affect states' ability to implement ESG-related regulations tailored to local needs and values. It also highlights the pressing challenges faced by securities markets in accommodating the rapid rise of ESG investing, including the need for standardized ESG metrics, enhanced transparency, and regulatory clarity. Drawing on legal analysis and case precedent, this Comment concludes that the Missouri rule violates NSMIA and commercial free speech rights. It then proposes potential strategies for reconciling federal preemption with the growing demand for ESG integration in investment decisions. It advocates for collaborative efforts between federal and state regulators, market participants, and stakeholders to develop a coherent framework based on NSMIA and the Department of Labor’s approach to ESG that allows investors to pursue ESG objectives while respecting the principles of national uniformity and investor protection.

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