BLUE-SKY LAW

blue-sky law.A state statute establishing standards for offering and selling securities, the purpose being to protect citizens from investing in fraudulent schemes or unsuitable companies. [Cases: Securities Regulation  248–273. C.J.S. Securities Regulation §§ 3, 374–376, 379–411, 414.]

“Although the public is probably more aware of the existence and operation of the several federal statutes administered by the Securities and Exchange Commission, most state legislation in this area is broader in scope. State securities laws, commonly referred to as ‘blue sky’ laws, were enacted long before the Securities Act of 1933, and Congress specifically preserved these laws instead of attempting to preempt the field for federal legislation.” Louis Loss & Edward M. Cowett, Blue Sky Law 3 (1958).

“The first legislative attempts to regulate securities transactions were effected on the state level, with the first general securities law being said to have been enacted by the State of Kansas in 1911, and with 48 jurisdictions having enacted such statutes by 1933. These statutes were said to be enacted to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines, and other fraudulent exploitations. A similar description of the early legislative purpose is that such acts were aimed at ‘speculative schemes which have no more basis than so many feet of blue sky,’ and this description has had a lasting influence in that state securities acts are commonly referred to as ‘blue sky laws.’ ” 69A Am. Jur. 2d Securities Regulation — State § 1 (1993).

“The state legislatures entered the arena of securities regulation more than twenty years before Congress…. [T]he statutes, which vary widely in their terms and scope, are commonly referred to as ‘blue sky’ laws, an appellation with several suggested origins. It has been said, for example, that the Kansas legislature was spurred by the fear of fast-talking eastern industrialists selling everything including the blue sky.” 1 Thomas Lee Hazen, Treatise on the Law of Securities Regulation § 8.1, at 490–92 (3d ed. 1995).[Blacks Law 8th]