blue sky laws

Definition

State securities regulations designed to protect investors from fraudulent offerings, supposedly named after schemes with 'no more basis than so many feet of blue sky.' The SEC's state-level cousins, equally enthusiastic about enforcement.

Example Usage

Before offering securities, the company had to comply with blue sky laws in all fifty states, requiring fifty separate filings and substantial legal fees.

Origin

Allegedly coined by a Kansas legislator who said fraudulent promoters would 'sell building lots in the blue sky'

Fun Fact

The National Securities Markets Improvement Act of 1996 preempted many blue sky laws, but states retain authority over fraud enforcement and intrastate offerings.

Source: State securities regulations and legislative history

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