Syndicators looking to raise capital from investors in Arkansas should be aware of Arkansas’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Arkansas‘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 Arkansas’s Blue Sky Rules apply.
What if I Need to Notify Arkansas about my Regulation D Syndication?
Filing fee – Variable
New notice – $100 – $500 (.1% of State Offering, min $100 max $500)
Late fee for late filings – $500 > 15 days after first sale in state; $1,000 >365 days
What are Arkansas’s Blue Sky Laws?
AR ST § 23-42-212 Registration not guarantee of truth
AR ST § 23-42-501 Sale of unregistered nonexempt securities
AR ST § 23-42-503 Exempted securities
AR ST § 23-42-505 Denial or revocation of exemption
AR ST § 23-42-506 Burden of proof
What are Arkansas’s securities laws exemptions?
Governmental entities; certain foreign governments including Canada; Financial institutions: banks, savings banks or institutions, trust companies, bank holding company, savings and loan, building and loan, savings and loan holding companies etc.; Farm cooperatives; Other entities: public utilities and holding companies; “World class” foreign issuers; Non-profit persons; Employee benefit plans
What are Arkansas’s procedures for securities law exemptions?
Applicable to: particular employee benefit plans; Procedure includes: notice of plan terms and 10 day waiting period; Applicable to: farm cooperatives; Procedure may include: Delivery of certain financial statements to commissioner and cooperative member, or Filing proof of exemption, fee based on offering price ($100 to $500) and 10 day waiting period
Frequently Asked Questions
Do I need an attorney from Arkansas then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Arkansas-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 Little Rock, Arkansas, that was going to be offered in different states, and you didn’t need counsel on questions related to Arkansas 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 Arkansas 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 Fayetteville, Arkansas, all of the investors were from Arkansas, and you wanted to use one of Arkansas’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Arkansas.
Is it ok if the real estate syndication attorney, licensed outside of Arkansas, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Arkansas. 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 Fort Smith, Arkansas, 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.
Tilden Moschetti, Esq., is a highly sought-after syndication attorney with nearly two decades of experience. His clientele ranges from real estate developers and startups to established businesses and private equity funds. Tilden’s expertise in syndication law comes not only from his knowledge of syndication and securities law but from real, hands-on experience as an active syndicator himself in every real estate product type and nearly all markets in the US. His knowledge and experience set him apart and established him as the Reg D legal services leader.