Series 79: 10.2.1. Blue Sky Laws

10.2.1. Blue Sky Laws

A blue sky law is a state law that regulates the offering and sale of securities. For more than 60 years after the Securities Act created the modern securities regulatory environment, Congress was careful not to preempt states’ blue sky laws. Because registration, qualification, and filing requirements varied from state to state, public offerings had to comply with a crazy-quilt of sometimes inconsistent state regulations in addition to federal requirements.

The National Securities Markets Improvement Act of 1996 (NSMIA) ended the long tradition of deference to state regulation. NSMIA exempts certain “covered securities” from state registration requirements and from most state regulatory hurdles. These covered securities specifically include securities listed on a national exchange, such as the NYSE or Nasdaq. Most major public offerings will fall into this category and are therefore exempt from state registration.

Covered securities also include those issued by registered investment companies, such as mutual funds; those sold to qualified purchasers, described in Chapter 2; those resold under a FAST Act exemption, desc