Syndicators looking to raise capital from investors in Connecticut should be aware of Connecticut’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Connecticut‘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 Connecticut’s Blue Sky Rules apply.
What if I Need to Notify Connecticut about my Regulation D Syndication?
Filing fee – Fixed
New notice – $150
Late fee for late filings – None
What are Connecticut’s Blue Sky Laws?
CT ST § 3-22j Participation in and the offering and solicitation of the trust exempt from sections 36b-16 and 36b-22 Evidence of exemption from federal securities laws
CT ST § 36b-16 Registration of security prior to offer or sale required. Exceptions
CT ST § 36b-21 Exemption of certain securities and transactions; Denial or revocation of exemption
CT ST § 36b-24 Findings by commissioner
CT ST § 36b-32a Applicability of the Philanthropy Protection Act of 1995
What are Connectifut’s securities laws exemptions?
Governmental entities; certain foreign governments including Canada; Financial institutions: international banking institutions, banks, savings institutions, savings banks, savings and loan associations, trust companies, credit unions, industrial loan associations etc.; Cooperatives: including cooperative associations, cooperative apartment corporations, cooperative marketing corporations for farmers, worker cooperative corporations; Real estate related securities; October 1, 1977 period offerings or disposals; Industrial or commercial development securities; Connecticut Development Credit Corporation; Other entities: railroads, common carriers, public utilities, public utility holding companies, and insurance companies; Equipment trust certificates; Listed stock exchange securities etc.; Non-profit persons; Current transaction commercial paper; Employee benefit plan
Frequently Asked Questions
Do I need an attorney from Connecticut then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Connecticut-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 Bridgeport, Connecticut, that was going to be offered in different states, and you didn’t need counsel on questions related to Connecticut 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 Connecticut 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 Stamford, Connecticut, all of the investors were from Connecticut, and you wanted to use one of Connecticut’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Connecticut.
Is it ok if the real estate syndication attorney, licensed outside of Connecticut, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Connecticut. 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 New Haven, Connecticut, 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.