What are State Blue Sky Laws?

In addition to Federal securities laws, states have their own securities regulations designed to protect investors which are referred to as Blue Sky Laws. Just like the SEC, states require securities to either be registered or exempted from registration before offering to investors of that state.

Filings must be made by the issuer offering the securities to each state where an investor resides. Each state’s securities laws have separate registration and exemption requirements. Even if the offering can be exempted from registration or qualification, there still may be state notice filing requirements and fees that states have the right to impose, per SEC rules.  States also have the right to investigate, bring enforcement, and suspend the offer or sale of securities within their state.

Securities Act Exemption State Registration required?
Section 4(a)(2) Yes
Regulation D – Rule 506(b) and 506(c) No, but notice filings and fees are required.
Regulation D – Rule 504 Yes
Regulation Crowdfunding No
Regulation A – Tier 1 Yes
Regulation A – Tier 2 No, but notice filings and fees are required.
Rules 147 and 147A, Rule 701 Yes

Since these laws require disclosure and filings of all securities offerings and sales, this creates a legal obligation on the issuer to timely report and track any subscriptions received from investors.  If sales commissions are paid to an underwriter or broker dealer, those firms must be licensed in each state that such sales occur.

Blue Sky compliance in all 50 states (even if sales aren’t made in some of the states) not only protects the issuer and investors, but also enhances trader volume, marketability and lends credibility to the offering. Each state requires annual regulatory compliance for any open offerings in their states.  Thus, it is important to have a Blue Sky filing agent such as Colonial Stock Transfer to assist you with each of these filings from initial notice and registration to annual compliance and amendments.

Contact us to obtain a blue sky filing proposal for your offering.

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