Exceptional and accessible legal representation across Kentucky and Nationwide

Exceptional and accessible legal representation across Kentucky and Nationwide


Are the securities you’re purchasing protected by Blue Sky law?

On Behalf of | Sep 20, 2018 | Representing Investors |

As savvy investors know, before investing, potential investors should review the investment for viability and suitability. But how can investors trust the information regarding the investment? One way to verify legitimacy is to see if the securities are registered with Kentucky’s Securities Division in accordance with Blue Sky laws.

What are Blue Sky laws?

Blue Sky laws are state laws governing investments and securities. The laws require companies to register the securities they wish to offer with the state’s securities division to ensure brokers and agents present investors with vetted opportunities. In Kentucky, the Compliance Branch conducts on-site reviews of invest firms, brokers and advisers to ensure compliance.

Blue Sky laws came about due to an abundance of illegitimate investment opportunities in the years preceding the Great Depression. Following the creation of federal legislation for securities regulation, federal statutes overlap, and occasionally preempt, state securities laws. In some cases, securities can fall under Blue Sky laws in multiple jurisdictions. For instance, securities for a Kentucky based company purchased by an investor living in Ohio could fall under the Blue Sky laws of both states. Although the laws differ by state, in general the securities must be:

· Sold by an issuer actively engaged in business.

· Priced at a reasonable rate.

· Issued by an issuer who owns a minimum amount of the securities assets.

· Not related to any unsold allotments from the securities dealer who underwrote the securities.

What securities are exempt?

Blue Sky laws do not cover all investments. Securities considered “covered securities” are exempt from Blue Sky laws. These include corporate stock shares acquired before January 1, 2011 and mutual funds acquired after January 1, 2012.

Unlike money deposited into a bank, investments are not guaranteed. It is in your best interest to thoroughly research the investment, the broker or agent and the company before choosing to invest. If you suspect a securities offering is not in compliance with Blue Sky laws, a securities lawyer can investigate the issue further and help you reach a resolution.

FindLaw Network