Syndicators looking to raise capital from investors in Iowa should be aware of the Iowa’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Iowa’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 Iowa’s Blue Sky Rules apply.
What if I Need to Notify Iowa about my Regulation D Syndication?
Filing fee – Fixed
New notice – $100
Late fee for late filings – $250 >15 days after the first sale in the state.
What are Iowa’s Blue Sky Laws?
- IA ST § 502.201 Exempt securities
- IA ST § 502.203 Additional exemptions and waivers
- IA ST § 502.204 Denial, suspension, revocation, condition, or limitation of exemptions
- IA ST § 502.301 Securities registration requirement
- IA ST § 502.503 Evidentiary burden
- IA ST § 502.506 Misrepresentations concerning registration or exemption–official endorsements prohibited
- IA ST § 502.608 Uniformity and cooperation with other agencies
- IA ST § 502.701 Public joint investment trusts
- IA ST § 536A.22 Thrift certificates
What are Iowa’s securities laws exemptions?
Governmental entities; certain foreign governments; Financial institutions: depository and banking institutions; Cooperatives: cooperative housing corporation, mutual or cooperative organization, and agricultural cooperative associations; Economic development corporations; Agricultural development authority; Membership camping contracts; Time shares; Viatical settlement contracts; Other entities: railroads, common carriers, public utilities, public utility holding companies, and insurance companies; Equipment trust certificates; Listed security market securities and clearing agency options etc.; Non-profit persons etc.; Joint investment trust
What are Iowa’s procedures for securities law exemptions?
Applicable to: non-profit persons etc.; Procedure could include: filing notice of terms, copies of sales materials, and review period; Filing exemption request; or Registration; Applicable to: agricultural cooperative associations; Procedure may include: written notice and financial statement
Frequently Asked Questions
Do I need an attorney from Iowa then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Iowa-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 Des moines, Iowa, that was going to be offered in different states, and you didn’t need counsel on questions related to Iowa 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 Iowa 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 Cedar Rapids, Iowa, all of the investors were from Iowa, and you wanted to use one of Iowa’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Iowa.
Is it ok if the real estate syndication attorney, licensed outside of Iowa, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Iowa. 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 Davenport, Iowa, 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.