Blue sky laws are state regulations that govern the sale of securities in an attempt to safe guard investors from fraud. The blue sky laws in each state vary in the specific details, but all states require securities, brokers, and brokerage firms to be registered with the state. Although the SEC is the most common enforcer of regulations against fraudulent practices, the states also have the power to go after violators of its anti-fraud, or blue sky, laws. Recently, the state’s authority and power to limit and restrict the sale of securities has declined as not to be duplicative of the federal regulations of the SEC. States are still able to investigate potential fraud and maintain their notice and filing requirements.
There is much more security for investors these days than in the past. The government goes to great lenths to protect the public from fraudlent investments. It is still important not to solely rely on the state and federal regulations to protect you. Research and awareness is the key to being a smart investor and to not get taken advantage of by deceitful investments.