What are Blue Sky Laws?
In addition to U.S. federal securities laws, individual states have their own securities laws, called “Blue Sky Laws,” that regulate the offering and selling of securities in their jurisdiction and implement safeguards for investors against securities fraud.
Who is affected?
If your principal place of business is located in one of these states, and/or if residents of one of these states purchased 50% or greater of the aggregate amount of your offering, you may be subject to notice filing obligations.
See the updated list of states with the corresponding notice obligations here.
Where is my principal place of business?
A company’s principal place of business is the location where officers direct, control, and coordinate the company’s activities. This is typically the location where the primary functions and decision-making activities of the enterprise occur. The principal place of business is generally the location where the headquarters of a company is situated, but not always.
Blue Sky laws vary by state and require issuers to register securities offerings and sales within the state, unless an exemption is available under the Securities Act of 1933. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012, also called Regulation Crowdfunding (Reg CF), provides an exemption.
Title III of the JOBS Act preempts certain Regulation Crowdfunding (Reg CF) transactions from registration under state Blue Sky Laws. However, some states still require notice filings be made in order for the state to review the securities offering. A Reg CF notice filing usually comprises of: (1) a Form C filed with the SEC (you are doing this already); (2) a consent to service of process on Form U-2; and (3) the state filing fee, if applicable. This filing should be made to the state securities regulators, as indicated by each state’s statute.
This FAQ sheet does not constitute as legal advice, please consult with your legal counsel as to whether a state filing is necessary for your offering. This summary was last updated on July 8, 2019.