The U.S. Securities and Exchange Commission (SEC) isn’t the only one that regulates the securities industry; each state has its own rules. These laws are referred to as blue sky laws which regulate broker-dealers, securities, brokers, investment advisors, and financial planners. They are designed to protect investors from securities fraud. For the most part, these laws require the registration of securities offerings, sales, brokers, investment advisors, brokerage firms, and anyone who sells securities. Each state has a Securities Commission in charge of overseeing this law.
Recognizing Blue Sky Law Violations
If a company fails to register its securities with the state or doesn’t register the firm, it may be considered a blue sky law violation. Keep in mind that there are some exceptions to this rule, which can be discussed with an experienced investment fraud attorney from our firm.
Blue sky laws help investors obtain recovery of their money if a violation of the law occurs. Below are some of the advantages that blue sky laws provide to investors:
Certain violations are fairly straightforward to prove. For example, a security is either registered in a state or not. You can contact your state’s securities regulator to find out.
The burden of proof lies on the seller of the security if they, their firm, or the security is not registered in the state. The broker would have to prove that the registration wasn’t required.
Blue sky laws tend to favor investors and put the risk of loss on the broker (or other seller of the security) for any violation. This is referred to as strict liability.
There is something known as a “right of rescission” under most blue sky laws, which means if you discover that your broker or the security is not registered, you can pursue a legal claim.
To have a successful blue sky law violation claim, you need to show that you purchased an unregistered security and, that the brokerage firm wasn’t registered in your state, or that there was another violation of the applicable blue sky law. You also need to provide information regarding the transaction and the losses you are trying to recover.
For a free case evaluation, contact an experienced investment fraud lawyer at Meyer Wilson. Our investment fraud attorneys have helped more than 800 investors across the country and have recovered millions of dollars in losses for our clients. Contact us today or fill out our online contact form.