When small businesses attempt to raise capital with a Regulation D offering, they are required to submit blue sky filings within the state that prospective investors reside. Blue Sky Laws vary greatly state by state and can make the capital raising process complicated and confusing. In this post, we discuss some of the issues presented by Blue Sky Laws, with a particular focus on New York.
Blue Sky Laws protect investors from fraud by requiring that securities offerings be registered or gain exemption from registration. Although many states have similar laws, there is significant variation in the laws and in their interpretation state to state. Main differences include, but are not limited to:
- Notice and filing requirements state by state are not uniform, including filing fees, amount of paperwork and time to approval
- States have different opinions regarding the “fairness” of an investment (Standards of Merit Review)
- Some states require audited financials while other states do not
Additional information regarding these issues can be read here:Understanding The NSMIA And Navigating State Blue Sky Laws- Part II.
New York & The Martin Act
New York is one of the wealthiest and most populous states, and thus receives significant attention from businesses seeking to raise capital. It also has its own set of Blue Sky Laws, which are significantly different from most other states.
New York’s Blue Sky Laws are covered under the Martin Act, which does not require the registration of securities (with some exceptions), but does require that issuers register as dealers for their own securities. The Martin Act also considers registered and exempt offerings in the same light, requiring that any company selling securities “to the public” register as a broker-dealer. The interpretation of “to the public” is vague and excludes private offerings, making it difficult to discern which notice filings are necessary for companies to submit.
With the variations in Blue Sky Laws state to state, successfully raising capital for your business can be a challenge. At Blue Sky Filings, we take care of the entire blue sky filing process for you. If you need more information about Blue Sky Laws or to get assistance with your blue sky filings, please contact us at Blue Sky Filings by calling (844)723-4537 or by filling out our online form.