Blue Sky Laws

Written By
Paul Tracy
Updated August 5, 2020

What are Blue Sky Laws?

Blue sky laws require the registration of brokers, brokerage firms and investment professionals in order to provide transparency of financial offerings and protect investors from investment fraud. Each state has its own blue sky law.

How Do Blue Sky Laws Work?

In an attempt to make money quickly at the expense of naïve or uninformed investors, companies offer enticing investment opportunities with little legitimate backing. For this reason, each U.S. state has blue sky laws in place to thwart such attempts and protect the public’s financial interest. Though such laws vary by state, blue sky laws require that the details of new securities issued be registered with state authorities for examination in order to assure the public of their legitimacy.

Why Do Blue Sky Laws Matter?

Blue sky laws help to prevent an individual’s loss from an investing scam by forcing companies to provide detailed information about potential stock or bond issues.