Syndicators looking to raise capital from investors in Illinois should be aware of Illinois’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Illinois’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 Illinois’s Blue Sky Rules apply.
What if I Need to Notify Illinois about my Regulation D Syndication?
Filing fee – Fixed
New notice – $100
Late fee for late filings – None
What are Illinois’s Blue Sky Laws?
IL ST CH 110 § 979/60 Securities Registration Exemption
IL ST CH 815 § 5/3 Exempt securities
IL ST CH 815 § 5/5 Registration of Securities
IL ST CH 815 § 5/11 Duties and powers of the Secretary of State
What are Illinois’s securities laws exemptions?
Governmental entities; certain foreign governments including Canada; Financial institutions: banks, savings banks, savings institutions, trust companies, bank holding companies, savings and loan, building and loan, credit unions and industrial loan associations etc.; Other entities: railroads, common carriers, public utilities, holding companies and insurance companies; Listed stock exchange securities, OTC margin stocks etc.; Agricultural cooperatives; Instruments relating to property acquisition; Mortgage related securities; Clearing agency options etc.; Non-profit persons; Current transaction commercial paper; Employee benefit plans etc.; Securities meeting certain conditions
Frequently Asked Questions
Do I need an attorney from Illinois then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Illinois-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 Chicago, Illinois, that was going to be offered in different states, and you didn’t need counsel on questions related to Illinois 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 Illinois 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 Aurora, Illinois, all of the investors were from Illinois, and you wanted to use one of Illinois’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Illinois.
Is it ok if the real estate syndication attorney, licensed outside of Illinois, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Illinois. 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 Joliet, Illinois, 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.