The Case for Federal Preemption of State Blue Sky Laws

Society imposes legal requirements on businesses (issuers) when they offer or sell their securities to investors.  These rules governing capital formation are generated both at the federal and state levels.  State securities rules are generally referred to as “state blue sky laws.”[1]

Both the federal rules and state blue sky laws contain antifraud provisions, which prohibit issuers that offer or sell their securities to investors from engaging in manipulative or deceptive acts.  Federal and state rules also contain registration rules, which typically require issuers to provide closely prescribed investment information to designated state and federal governmental agencies (the Securities … Read more

The Role of State Blue Sky Laws After the JOBS Act and the National Securities Markets Improvement Act

State securities laws—generally referred to as “blue sky laws”— contain both registration provisions and antifraud provisions.  Registration provisions require that a company offering its securities to investors in a particular state register its securities with the state or meet the requirements for an exemption from the state’s registration provisions.  State antifraud provisions prohibit fraud in connection with the offer and sale of securities.

Blue sky laws – in particular, state registration provisions—have been a significant, unfair and inefficient impediment to small business capital formation.  A small business offering its securities as a way to raise capital is required to meet … Read more