Syndicators looking to raise capital from investors in Arizona should be aware of the Arizona’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Arizona‘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 Arizona’s Blue Sky Rules apply.
What if I Need to Notify Arizona about my Regulation D Syndication?
Filing fee – Fixed
New notice – $250
Late fee for late filings – none
What are Arizona’s Blue Sky Laws?
AZ ST § 44-1841 Sale of unregistered securities prohibited; classification
AZ ST § 44-1843 Exempt securities; fee; filing
AZ ST § 44-1843.01 Nonexempt government securities; covered securities; exemptions
AZ ST § 44-1843.02 Special filing requirements for certain exempt or federal covered securities
AZ ST § 44-1845 Exemption or special registration of certain securities and transactions by commission rule
AZ ST § 44-1846 Powers of commission to exempt certain securities or transactions
AZ ST § 44-1847 Power of commission to exempt certain securities or transactions of regulated issuers
AZ ST § 44-1850 Viatical or life settlement investment contracts
AZ ST § 44-2033 Burden of proof of exemptions
What are Arizona’s securities laws exemptions?
Governmental entities (with exception); certain foreign governmental entities; Government securities excepted; Financial institutions: banks, credit or loan association, savings institutions, saving and loan; Other entities: railroads, public utilities and insurance contracts; Mortgage related, mortgage secured instruments etc.; Listed stock exchange securities etc.; Non-profit persons; Current transaction commercial paper; Viatical settlement contracts
What are Arizona’s procedures for securities law exemptions?
Applicable to: certain foreign governmental entities, listed stock exchange securities etc. and non-profit persons; Procedure includes: fee of $200 per offering; Applicable to: government securities excepted; Procedure may include: filing notice of offering, applicable trust indenture, prospectus, $200 filing fee, and 20 day waiting period or less; Applicable to: certain viatical settlement contracts; Procedure may include: Filing timely notice of intent to sell, consents to service of process, submits audit report etc., disclosures to offeree
Frequently Asked Questions
Do I need an attorney from Arizona then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Arizona-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 Phoenix, Arizona, that was going to be offered in different states, and you didn’t need counsel on questions related to Arizona 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 Arizona 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 Tucson, Arizona, all of the investors were from Arizona, and you wanted to use one of Arizona’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Arizona.
Is it ok if the real estate syndication attorney, licensed outside of Arizona, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Arizona. For example, Tilden Moschetti, Esq, syndication attorney for the Moschetti Syndication Law Group, will look, if asked, about the contract underlying your purchase contract in Mesa, Arizona, 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.