Alabama Blue Sky Laws for Syndication

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Syndicators looking to raise capital from investors in Alabama should be aware of Alabama’s Blue Sky Laws. These laws regulate the securities industry within the state, and understanding the basics of Alabama’s blue sky laws will help you make smart business decisions about how you put together an offer and protect yourself from potential legal trouble.

 

What are Blue Sky Laws in General? 

The purpose of securities laws is to protect investors. There are two levels of regulatory agencies that provide that protection: the Securities and Exchange Commission (the SEC) and each state’s security regulation agency.

Federal law has severely restricted the states’ abilities to review or restrict sales of most securities when offered through a Federal regulation (such as syndication of a Reg D offering). The states do, however, often require a notice be filed with them along with the appropriate fee, conduct investigations, and bring fraud actions if necessary in order to protect those domiciled in their states.

When everything takes place within the state, then Alabama’s Blue Sky Rules apply. 

 

What if I Need to Notify Alabama about my Regulation D Syndication?

Here are the basic facts you need to know about giving notice to Alabama about your Reg D Rule 506b or 506c offer:

Filing fee – Fixed

New notice – $300

Late fee for late filings – none

 

What are Alamaba’s Blue Sky Laws?

AL ST § 8-6-4 Registration of securities — Required; exceptions

AL ST § 8-6-10 Registration of securities — Exempt securities

AL ST § 8-6-14 Filing or registration not finding of truth, completeness, etc., of documents; representations concerning effect of registration or exemption

AL ST § 8-6-30 Burden of proving exemption or exception from definition

 

What are Alabama’s securities laws exemptions?

Governmental entities; certain foreign governments including Canada; Financial institutions: banks, savings institutions, trust companies, savings and loan, building and loan, credit unions, industrial loan associations etc.; Open-end management investment companies or unit investment trusts; Other entities: railroads, common carriers, public utilities and holding companies; Listed stock exchange securities etc.; Non-profit persons; Current transaction commercial paper; Employee benefit plans

 

What are Alabama’s procedures for securities law exemptions? 

Applicable to: open-end management investment companies or unit investment trusts; Procedure includes: notice of intent to sell and filing fees ranging from $300 to $1000; Applicable to: non-profit persons; Procedure includes: filing notice listing offer terms and 15 day review period.

 

Frequently Asked Questions

Do I need an attorney from Alabama to put together an offering?

That depends. If the offering you are putting together is under Regulation D and not one of the Alabama-specific Blue Sky Laws (as discussed above), then probably not. 

For example, if you needed a real estate syndication attorney to put together a private placement memorandum for a multifamily deal in Huntsville, Alabama that was going to be offered in different states, and you didn’t need counsel on questions related to Alabama laws, then chances are a licensed syndication lawyer would be able to help. They could even put together the entity for you and write the operating agreement; they just couldn’t provide you counsel on the specific laws of Alabama and how they may or may not pertain to your offer.

However, if you were putting together a private placement memorandum for a development project in Birmingham, Alabama, all of the investors were from Alabama, and you wanted to use one of Alabama’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Alabama.

 

Is it ok if the real estate syndication attorney, licensed outside of Alabama, looks over my purchase contract?

They can look, but they can’t give you advice as it pertains to Alabama. For example, Tilden Moschetti, Esq, our syndication attorney, will look, if asked, about the contract underlying your purchase contract in Montgomery, Alabama, but makes it clear that he can give business consulting advice (discussion on price and broad deal points like the length of time until closing), but cannot speak to any specific term as he is not licensed there.

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