Syndicators looking to raise capital from investors in Georgia should be aware of Georgia’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Georgia’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 Georgia’s Blue Sky Rules apply. 

 

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

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

Filing fee – Fixed

New notice – $250

Late fee for late filings – None

 

What are Georgia’s Blue Sky Laws?

 

GA ST § 10-5-10 Exempt securities

GA ST § 10-5-22 Registration of securities; statement and records; effective date of registration

GA ST § 10-5-50 Fraudulent acts unlawful

 

What are Georgia’s securities laws exemptions?

A security, including a revenue obligation or a separate security as defined in Rule 131, 17 C.F.R. 230.131, adopted under the Securities Act of 1933, 15 U.S.C. Section 77a, et seq., issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress or a certificate of deposit for any of the foregoing; (2) A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor; (3) A security issued by and representing or that will represent an interest in or a direct obligation of or be guaranteed by: (A) An international banking institution; (B) A banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of P. L. 87-722, 12 U.S.C. Section 92a; or (C) Any other depository institution, unless by rule or order the Commissioner proceeds under Code Section 10-5-13; (4) A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state; (5) A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company; (6) A federal covered security; (7) A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes or as a chamber of commerce and not for pecuniary profit; (8) A member’s or owner’s interest in, retention certificate, or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a nonprofit membership cooperative under the cooperative laws of a state; (9) An equipment trust certificate with respect to equipment leased or conditionally sold to a person if any security issued by the person would be exempt under this Code section or would be a federal covered security.

 

Frequently Asked Questions

Do I need an attorney from Georgia then to put together an offering?

That depends. If the offering you are putting together is under Regulation D and not one of the Georgia-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 Atlanta, Georgia, that was going to be offered in different states, and you didn’t need counsel on questions related to Georgia 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 Georgia 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 Columbus, Georgia, all of the investors were from Georgia, and you wanted to use one of Georgia’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Georgia.

 

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

They can look, but they can’t give you advice as it pertains to Georgia. 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 Augusta, Georgia, 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.