blue sky law


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Blue Sky Law

A popular name for state statutes providing for the regulation and supervision of Securities offerings and sales, to protect citizen-investors from investing in fraudulent companies. Most blue sky laws require the registration of new issues of securities with a state agency that reviews selling documents for accuracy and completeness. Blue sky laws also often regulate securities brokers and salespeople.

Almost all states have adopted blue sky laws, regulating the sale of securities—investments in bonds, mutual funds, limited partnerships, and so forth. These laws acquired their name as early as 1917, when the Supreme Court issued a decision on "speculative schemes which have no more basis than so many feet of 'blue sky'" (Hall v. Geiger-Jones Co., 242 U.S. 539, 37 S. Ct. 217, 61 L. Ed. 480).

Blue sky laws place requirements on corporations and securities dealerships that offer investments for sale to the public in a particular state. These laws are in many cases adopted from the Uniform Securities Act, and are usually enforced primarily by the state's attorney general's office. The federal Securities and Exchange Commission (SEC) enforces federal laws that concern foreign and interstate transactions.

State blue sky laws require corporations to register securities before selling them so that regulators can check their marketing information for accuracy. National on-line computer networks that became widely available in the mid-1990s posed new problems for states trying to enforce these requirements. Texas, Ohio, and New Jersey were among states that by 1995 had begun prosecuting some of the thousands of dealers who were offering unregistered investment opportunities to small investors on computer bulletin boards.

State laws usually require corporations to file financial information, and can deny corporations the privilege of doing business if their profile or history is risky. State investigators can determine whether a corporation's financial structure allows it to sell certain securities.

The laws also spell out the qualifications of brokers, dealers, salespeople, investment advisers, and others who work in the securities business. They require dealers to identify the type of investments they are planning to sell and where.

Among the activities blue sky laws seek to prevent are hard-sell tactics. Telephone "stock-peddling" techniques that are high-pressure and misleading can result in the suspension of a broker's license. A 1992 survey by Louis Harris and Associates indicated that more than one-third of all U.S. citizens had received a phone call about investing, and five percent had made a purchase. Many states now require that brokerages and corporations selling on the public market also provide a printed prospectus that describes the risks of investing.

What happens when blue sky laws do not work? States often provide an avenue for victims of illegally sold securities to try to recover their money, sometimes in addition to criminal prosecution. Investors can charge Misrepresentation or lack of suitability and can demand restitution from the Broker in arbitration. class action suits can also be filed against a fraudulent brokerage or corporation.

Further readings

CCH Editorial Staff. 1999. Blue Sky Law Desk Reference. Chicago, Ill.: CCH Inc.

Maynard, Therese H. 1997. "The Future of California's Blue Sky Law." Loyola of Los Angeles Law Review 30 (June): 1573–98.

Shade, Joseph. 1997. "Financing Exploration: Requirements of Federal and State Securities Laws." Natural Resources Journal 37 (summer): 749–83.

Slobodzian, Joseph A. 1999. Third Circuit Upholds Blue Sky Law." The National Law Journal 20 (February 1): B4.

Cross-references

Securities; Stock.

blue sky law

noun canons regarding securities, preeepts on securities, securities law, securities oversight, secuuities rules, securities statutes
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will also be published in the Daily News section of Standard Corporation Records, a recognized securities manual for secondary trading in up to 38 states under their Blue Sky Laws.
The securities to be offered will not be registered under the Securities Act or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from the registration requirements.
The notes have not been registered under the Securities Act or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from the registration requirements.
Despite this, the company had maintained the Boston Stock Exchange listing, in part, due to certain exemptions from State Blue Sky laws available to issuers listed on the Boston Stock Exchange.
In any jurisdiction in which the securities laws or blue sky laws require the tender offers and consent solicitations to be made by a licensed broker or dealer, the tender offers and consent solicitations will be deemed to be made on behalf of EOP Operating Limited Partnership by the Dealer Managers (who are also the Solicitation Agents), or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction.
As part of the program, a full description of Language Access Network will also be published in the Daily News section of Standard Corporation Records, a recognized securities manual for secondary trading in approximately 37 states under the Blue Sky Laws.