Alaska Blue Sky Laws for Syndication

Navigating the complexities of securities laws is a critical aspect of raising capital for real estate syndication and other business ventures. For sponsors and investors operating in Alaska, understanding both state-specific Blue Sky Laws and federal regulations under Regulation D is essential. These laws dictate the registration, exemption, and notification requirements for securities offerings, impacting how you structure and present your investment opportunities.

This comprehensive guide provides an in-depth look at Alaska’s Blue Sky Laws, their relationship with the SEC’s Regulation D, and the procedures you need to follow to ensure compliance. We’ll explore why you might choose Regulation D Rule 506(b) or Rule 506(c) over state-specific exemptions, detail the notification rules for state filings, and explain the exemptions available under Alaska’s securities laws. Additionally, we’ll address whether you need a local attorney to structure your offering and the role of out-of-state attorneys in reviewing purchase contracts.

By understanding these regulatory frameworks, real estate developers, private equity fund managers, business owners, and syndication professionals can confidently navigate the legal landscape, avoid common pitfalls, and focus on successfully raising capital for their projects.

How do a State’s Blue Sky Laws Relate to the SEC’s Regulation D?

When raising capital through securities offerings, understanding the interplay between state Blue Sky Laws and the SEC’s Regulation D is crucial for compliance and successful syndication. Here’s a detailed look at how these regulations interact, particularly in the context of Rule 506(b) and Rule 506(c) offerings.

Preemption of State Blue Sky Laws by Regulation D

Under federal law, specifically 15 U.S. Code § 77r(b)(4)(F), securities offerings made pursuant to Regulation D Rule 506(b) or Rule 506(c) are preempted from state Blue Sky Laws. This means that states cannot impose their own registration requirements on these offerings, simplifying the regulatory burden for issuers. Essentially, if you are conducting a private placement under Rule 506(b) or Rule 506(c), you are primarily subject to federal regulations rather than the patchwork of state securities laws.

Key Points:

• Rule 506(b) allows issuers to raise an unlimited amount of capital from an unlimited number of accredited investors and up to 35 non-accredited investors, provided there is no general solicitation or advertising.
• Rule 506(c) permits issuers to solicit funds from accredited investors only, but allows for general solicitation and advertising, provided that the issuer takes reasonable steps to verify that all investors are accredited.

State Notification Requirements

Although states cannot require the registration of securities offered under Regulation D, they can and do require issuers to file notice filings and pay fees. These filings typically include a copy of the Form D that issuers file with the SEC, and they must be submitted to each state where the securities are offered or sold.

Notification Rules:

• Issuers must file a notice with the state securities regulator.
• This notice usually includes a copy of the Form D and any state-specific forms.
• Fees vary by state and must be paid as part of the notice filing.

Intrastate Offerings Under State Blue Sky Laws

There are scenarios where a sponsor might choose to comply with state Blue Sky Laws instead of relying on federal Regulation D. One such scenario is an intrastate offering, where the issuer, all investors, and the assets are located within a single state.

Intrastate Offering Considerations:

• Eligibility: To qualify, the offering must be limited to investors within the state, and the business must be primarily based in that state.
• Compliance: While intrastate offerings can simplify the regulatory framework by dealing solely with state laws, they often come with their own set of rules and requirements.

Choosing between federal Regulation D exemptions and state Blue Sky Laws depends on various factors, including the geographic distribution of potential investors and the specific needs of the offering. Consulting with a syndication attorney is essential to navigate these complexities and ensure compliance with all relevant regulations.

In summary, while Regulation D Rule 506(b) and Rule 506(c) offerings preempt state Blue Sky Laws, requiring only notice filings at the state level, intrastate offerings remain a viable option under certain conditions. Understanding these nuances is vital for anyone involved in real estate syndication or other forms of capital raising.

Why Would I Choose Regulation D Rule 506(b) or Rule 506(c) Over the State’s Blue Sky Laws?

When raising capital through syndication, sponsors often face the decision between adhering to federal regulations under Regulation D and navigating state Blue Sky Laws. Opting for Regulation D Rule 506(b) or Rule 506(c) offers several advantages, particularly when considering the complexities and risks associated with state-specific securities regulations.

Federal Preemption and Simplified Compliance

One of the primary reasons to choose Regulation D Rule 506(b) or Rule 506(c) over state Blue Sky Laws is the federal preemption. Under 15 U.S. Code § 77r(b)(4)(F), securities offerings made under these rules are exempt from state registration requirements. This preemption significantly reduces the regulatory burden on issuers, who would otherwise have to navigate a patchwork of varying state laws.

Benefits of Federal Preemption:

• Streamlined Process: Issuers need to comply with a single set of federal regulations rather than multiple state regulations.
• Uniform Standards: Federal rules provide consistent standards and requirements, simplifying the offering process.
• Reduced Costs: Avoiding state registration can reduce administrative and legal costs.

Flexibility in Investor Location

Choosing Regulation D is particularly advantageous when the offering involves investors or sponsors from multiple states. State Blue Sky Laws apply only to intrastate offerings, where all participants and the assets are located within a single state. If any investor or the sponsor is outside the state, the offering cannot qualify under these laws.

Risks of State Blue Sky Laws:

• Investor Domicile Issues: An offering may initially qualify as intrastate, but if it’s discovered that an investor is actually domiciled outside the state, the offering could lose its intrastate status. This reclassification can lead to significant legal problems, including potential violations of securities laws.
• Geographic Limitations: State Blue Sky Laws restrict the pool of potential investors to those within the state, limiting the capital-raising potential.

Advantages of Regulation D Rule 506(b) and Rule 506(c)

Rule 506(b):

• Allows issuers to raise an unlimited amount of capital.
• Permits investment from an unlimited number of accredited investors and up to 35 non-accredited investors.
• Prohibits general solicitation and advertising, maintaining a private offering environment.

Rule 506(c):

• Also allows for an unlimited amount of capital to be raised.
• Restricts investment to accredited investors only.
• Permits general solicitation and advertising, provided issuers take reasonable steps to verify that all investors are accredited.

These advantages make Regulation D Rule 506(b) and Rule 506(c) highly attractive for sponsors looking to maximize their fundraising potential while minimizing regulatory risks.

Considerations for Choosing Regulation D:

• Broader Investor Base: Federal regulations allow for a wider pool of potential investors from multiple states and even internationally.
• Legal Certainty: Compliance with a well-established federal framework provides greater legal certainty and reduces the risk of inadvertent violations.
• Market Reach: The ability to use general solicitation under Rule 506(c) can enhance the visibility of the offering and attract more investors.

Opting for Regulation D Rule 506(b) or Rule 506(c) over state Blue Sky Laws offers significant benefits, including simplified compliance, broader market reach, and reduced legal risks. These federal exemptions provide a robust and flexible framework for raising capital, making them a preferred choice for many syndicators and sponsors. By understanding and leveraging these advantages, you can ensure a smoother, more effective capital-raising process for your syndication projects.

What Are The Notification Rules and Terms For Notifying the State About a Regulation D Rule 506(b) or Rule 506(c) Offering?

When conducting a securities offering under Regulation D Rule 506(b) or Rule 506(c), issuers are required to comply with federal regulations and certain state notification requirements. While state Blue Sky Laws are preempted, states can still require issuers to submit notice filings and pay associated fees. This section outlines the notification rules and terms for notifying the state about a Regulation D Rule 506(b) or Rule 506(c) offering, with a specific focus on Alaska’s requirements.

Federal and State Filing Requirements

Federal Filing:

• Issuers must file a Form D with the SEC within 15 days after the first sale of securities in the offering. This filing provides the SEC with essential information about the offering, including details about the issuer, the type of securities offered, and the exemption claimed under Regulation D.

State Filing:

• In addition to the federal filing, issuers must also file a notice with each state where securities are offered or sold. This state filing typically includes a copy of the Form D filed with the SEC and any state-specific forms required by the local securities regulator.

Notification Rules for Alaska

For issuers conducting a Regulation D Rule 506(b) or Rule 506(c) offering in Alaska, the following notification rules and terms apply:

1. Filing Fee:

• A fixed filing fee of $600 is required for submitting the notice of the offering to the Alaska Division of Banking and Securities.

2. New Notice:

• Issuers must file a new notice with the Alaska Division of Banking and Securities within 15 days after the first sale of securities in the offering. This filing includes:
• A copy of the Form D as filed with the SEC.
• Any additional information or documentation required by the Alaska Division of Banking and Securities.

3. Late Fee:

• Unlike some other states, Alaska does not impose a late fee for late filings of the notice. However, timely filing is crucial to maintain compliance and avoid potential legal complications.

Submitting the Notice through NASAA Electronic Filing Depository

Issuers can submit their notices to the state through the NASAA Electronic Filing Depository (EFD), a streamlined online platform designed to facilitate state securities filings.

Steps for Filing a Notice in Alaska:

1. Prepare Form D: Complete the Form D with all required information about the offering.
2. File with the SEC: Submit the Form D to the SEC electronically through the EDGAR system within 15 days after the first sale of securities.
3. Submit via NASAA EFD:

• Go to the NASAA Electronic Filing Depository (EFD) website at NASAA EFD.
• Create an account or log in if you already have one.
• Follow the instructions to submit a copy of the Form D, along with the $600 filing fee, to the Alaska Division of Banking and Securities through the EFD system.

Importance of Compliance

Ensuring timely and accurate filing of notice with the state is essential for maintaining compliance and avoiding potential legal issues. Even though Alaska does not impose a late fee, failure to file the notice within the required timeframe can result in regulatory scrutiny and undermine investor confidence.

Best Practices:

• Stay Organized: Keep track of all filing deadlines and required documentation.
• Consult a Syndication Attorney: Engage a legal expert specializing in securities law to ensure all filings are completed accurately and on time.
• Monitor Updates: Regularly check for any updates to state filing requirements or fees.

Understanding and adhering to the notification rules and terms for notifying the state about a Regulation D Rule 506(b) or Rule 506(c) offering is critical for compliance and the success of your syndication efforts. By following the outlined procedures and leveraging the expertise of a syndication attorney, you can navigate the regulatory landscape effectively and focus on achieving your capital-raising goals.

What are Alaska’s Blue Sky Laws?

Alaska’s Blue Sky Laws are designed to protect investors from fraud and ensure transparency in the securities market. These laws include various provisions, such as the requirement for securities registration, exemptions for certain securities, and prohibitions against misrepresentation regarding registration or exemption. Additionally, the statutes grant administrative powers to enforce compliance, including issuing cease and desist orders and imposing penalties. Understanding these regulations is crucial for anyone involved in securities within Alaska to ensure legal compliance and protect investor interests.

AK ST § 45.56.100 Securities registration requirement

Alaska Statutes § 45.56.100 (2018) mandates that a security cannot be offered or sold within Alaska unless it meets one of the following criteria: it is a federal covered security, it is registered under the Alaska Securities Act, or it is exempt from registration under specific provisions (AS 45.56.110 – 45.56.160). This statute ensures that securities are properly regulated to protect investors within the state.

AK ST § 45.56.530 Misrepresentations concerning registration or exemption

Alaska Statutes § 45.56.530 (2020) stipulates that the filing or registration of securities or persons under the Alaska Securities Act does not imply that the administrator has verified the accuracy, completeness, or non-misleading nature of the filed records. Furthermore, it does not indicate any endorsement or approval by the administrator. It is prohibited for any individual to make representations contrary to these provisions to clients or potential clients.

AK ST § 45.56.110 Exempt securities

Alaska Statutes § 45.56.110 (2018) outlines various securities that are exempt from registration requirements. These include securities issued or guaranteed by the U.S. government, states, political subdivisions, and certain financial institutions. It also covers securities from foreign governments with diplomatic relations with the U.S., securities issued by nonprofit organizations, and those linked to public utilities or cooperatives. Additionally, securities related to specific banking and insurance institutions and those listed on recognized securities markets are also exempt.

AK ST § 45.56.690 Administrative enforcement

Alaska Statutes § 45.56.690 (2019) empowers the administrator to enforce compliance with securities regulations by issuing orders to cease and desist, imposing civil penalties, seeking restitution, and covering investigation costs. Violations against older or vulnerable adults may incur additional penalties. Orders are effective immediately, and subjects may request hearings. Final orders can be enforced through the courts, including civil contempt proceedings for non-compliance.

What Are Alaska’s Securities Laws Exemptions?

Alaska’s securities laws provide a variety of exemptions from registration requirements, making it easier for certain entities and transactions to raise capital without undergoing the full registration process. These exemptions are outlined in the Alaska Statutes, specifically in Section 45.56.110. Understanding these exemptions is crucial for issuers to determine whether their offering can qualify and benefit from reduced regulatory obligations. Here’s a detailed look at the key exemptions under Alaska’s securities laws.

1. Governmental Entities and Certain Foreign Governments

Securities issued by governmental entities are exempt from registration in Alaska. This includes:

• U.S. federal, state, and local government entities.
• Foreign governments with which the U.S. maintains diplomatic relations, including the government of Canada and its political subdivisions.

2. Financial Institutions

Various financial institutions are exempt from registration, covering a broad spectrum of financial service providers, including:

• Banks and savings institutions.
• Savings and loan associations.
• Building and loan associations.
• Trust companies.
• Credit unions.
• Industrial loan associations.

3. Alaska Commercial Fishing and Agricultural Bank

The Alaska Commercial Fishing and Agricultural Bank, established under state law to support the state’s commercial fishing and agricultural sectors, enjoys an exemption from securities registration.

4. Equity Securities

Equity securities are exempt if they meet specific criteria outlined by Alaska statutes. This typically involves securities that have been previously registered and meet ongoing reporting requirements under federal securities laws.

5. Other Entities

Certain other entities and organizations are also exempt from registration, including:

• Railroads.
• Common carriers.
• Public utilities.
• Holding companies.
• Insurance companies.

These entities often operate under extensive regulatory oversight, providing an additional layer of investor protection, which justifies the exemption from state securities registration.

6. Listed Stock Exchange Securities

Securities listed or approved for listing on recognized stock exchanges are exempt. This includes securities listed on:

• The New York Stock Exchange (NYSE).
• The Nasdaq Stock Market.
• Other national securities exchanges registered with the SEC.

7. Non-Profit Organizations

Securities issued by non-profit organizations are exempt from registration. These include:

• Religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory organizations.
• Other organizations not organized for profit and without the prospect of distributing gains to members.

8. Current Transaction Commercial Paper

Commercial paper and other short-term debt securities are exempt if they meet specific conditions related to maturity and are part of a current transaction. This exemption is designed to facilitate the issuance of commercial paper in the ordinary course of business.

9. Employee Benefit Plans

Securities issued as part of employee benefit plans are also exempt. This includes:

• Employee stock purchase plans.
• Stock options.
• Other similar benefit plans that are broadly distributed to employees.

Understanding and Leveraging Exemptions

Navigating the intricacies of Alaska’s securities law exemptions can be complex, but these exemptions provide valuable pathways for issuers to raise capital without the full burden of registration. It’s crucial for issuers to thoroughly understand the specific criteria and documentation required to qualify for these exemptions.

Best Practices:

• Consult a Syndication Attorney: Engage a legal expert specializing in securities law to determine if your offering qualifies for an exemption.
• Maintain Documentation: Keep detailed records and documentation to support the claimed exemption.
• Monitor Compliance: Ensure ongoing compliance with any conditions or limitations associated with the exemption to avoid potential regulatory issues.

By leveraging these exemptions, issuers can streamline their capital-raising efforts while maintaining compliance with Alaska’s securities regulations.

What Are Alaska’s Procedures for Securities Law Exemptions?

Navigating the procedures for claiming securities law exemptions in Alaska involves understanding the specific steps and documentation required to comply with state regulations. These procedures ensure that issuers can legally offer and sell securities without full registration, provided they meet the criteria for an exemption under Alaska law. Here’s a detailed guide to the process.

Identifying the Appropriate Exemption

The first step is to determine which exemption applies to your offering. As outlined in Section 45.56.110 of the Alaska Statutes, there are various exemptions available, including those for governmental entities, financial institutions, certain foreign governments, non-profit organizations, and others. Each exemption has specific eligibility criteria.

Key Exemptions Include:

• Governmental entities and certain foreign governments
• Financial institutions
• Alaska Commercial Fishing and Agricultural Bank
• Equity securities
• Other entities (railroads, public utilities, etc.)
• Listed stock exchange securities
• Non-profit organizations
• Current transaction commercial paper
• Employee benefit plans

Preparing Documentation

Once the appropriate exemption is identified, issuers must prepare the necessary documentation to support their claim. This typically includes:

• Description of the Offering: Detailed information about the securities being offered, the terms of the offering, and the issuer’s business.
• Investor Information: Depending on the exemption, details about the investors, such as their accreditation status or domicile, may be required.
• Compliance Records: Documentation showing that the issuer meets the criteria for the chosen exemption.

Filing Notice with the State

Even if the securities are exempt from registration, issuers may still need to file a notice with the Alaska Division of Banking and Securities. This ensures the state is aware of the offering and can maintain oversight.

Steps for Filing a Notice:

1. Complete the Required Forms: Prepare any state-specific forms required by the Alaska Division of Banking and Securities.
2. Prepare Supporting Documentation: Gather all necessary supporting documents that prove the offering meets the exemption criteria.
3. Submit via NASAA EFD: Use the NASAA Electronic Filing Depository (EFD) to submit the notice and supporting documents to the state. Visit NASAA EFD to create an account and follow the instructions for filing.

Filing Fee

A fixed filing fee may be required when submitting the notice. In Alaska, the filing fee for notifying the state about an exempt securities offering is $600. This fee supports the administrative costs associated with processing the notice.

No Late Fees

Alaska does not impose a late fee for late filings of the notice. However, timely filing is critical to ensure compliance and avoid potential legal issues.

Monitoring Compliance

After filing the notice, it’s important for issuers to monitor their compliance with all applicable regulations. This includes:

• Maintaining Records: Keep detailed records of the offering, including all filings and communications with investors and regulators.
• Ongoing Disclosure: If there are any material changes to the offering or the issuer’s circumstances, additional disclosures may be required.

Best Practices:

• Engage a Syndication Attorney: Work with a legal expert to ensure all procedures are followed correctly and that the offering remains compliant with state and federal laws.
• Stay Informed: Regularly review updates from the Alaska Division of Banking and Securities to stay current on any changes to the exemption procedures.
• Document Everything: Maintain comprehensive records of all filings, notices, and compliance efforts to safeguard against future regulatory scrutiny.

Understanding and following Alaska’s procedures for securities law exemptions is essential for issuers seeking to raise capital efficiently and legally. By identifying the appropriate exemption, preparing thorough documentation, and filing the necessary notices through the NASAA Electronic Filing Depository, issuers can streamline their compliance efforts and focus on successfully executing their capital-raising strategies. Consulting with a knowledgeable syndication attorney is highly recommended to navigate these processes smoothly and ensure full compliance with all regulatory requirements.

Frequently Asked Questions

Do I Need an Attorney from Alaska to Put Together an Offering?

The necessity of hiring an attorney from Alaska to put together a securities offering depends on the specifics of the offering and the regulations involved. If your offering is structured under Regulation D and does not rely on Alaska-specific Blue Sky Laws, you likely do not need an attorney licensed in Alaska.

For instance, suppose you need a real estate syndication attorney to prepare a private placement memorandum (PPM) for a multifamily deal in Anchorage, Alaska, and plan to offer it in multiple states. In that case, you probably don’t require specific counsel on Alaska laws. A licensed syndication lawyer from another state can assist with drafting the PPM, forming the entity, and writing the operating agreement. However, they would not be able to advise you on specific Alaska laws and how they might apply to your offering.

Conversely, if you are preparing a PPM for a development project in Fairbanks, Alaska, with all investors based in Alaska, and you intend to use one of Alaska’s Blue Sky Laws as an exemption to registration, you would need to work with an attorney licensed in Alaska. This is because only an attorney familiar with Alaska’s specific securities regulations can provide the necessary legal counsel and ensure compliance with state-specific requirements.

In summary, the decision hinges on whether your offering falls under federal Regulation D exemptions or requires adherence to Alaska’s Blue Sky Laws. For multi-state offerings under Regulation D, a general syndication attorney would suffice. However, for intrastate offerings relying on Alaska-specific exemptions, legal expertise from an attorney licensed in Alaska is essential to navigate the state’s regulatory landscape effectively.

Is it Okay if the Real Estate Syndication Attorney, Licensed Outside of Alaska, Looks Over My Purchase Contract?

While a real estate syndication attorney licensed outside of Alaska can review your purchase contract, there are limitations on the advice they can provide regarding Alaska-specific legal matters. For instance, Tilden Moschetti, Esq., a syndication attorney with the Moschetti Syndication Law Group, can examine the contract for your property purchase in Juneau, Alaska. He can offer business consulting advice, such as discussing the price and general deal terms like the closing timeline. However, he must refrain from providing legal advice on specific terms of the contract, as he is not licensed to practice law in Alaska.

This distinction is crucial because legal nuances and state-specific regulations can significantly impact the terms and enforceability of a contract. While an out-of-state attorney can help you understand the broader business implications and structure of your deal, they cannot offer guidance on local legal issues, which might include zoning laws, local property regulations, or state-specific contract clauses.

Therefore, while it is beneficial to have an experienced syndication attorney review your contract from a business perspective, you should seek legal advice from an attorney licensed in Alaska to ensure all legal aspects of the contract are thoroughly addressed and compliant with state laws. This dual approach can help you navigate the complexities of real estate transactions effectively while ensuring full legal compliance.