Syndicators looking to raise capital from investors in Kansas should be aware of the Kansas’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Kansas’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 Kansas’s Blue Sky Rules apply.
What are Kansas’s Blue Sky Laws?
KS ST 17-12a201 Exempt securities
KS ST 17-12a203 Additional exemptions and waivers
KS ST 17-12a204 Denial, suspension, revocation, condition or limitation of exemptions
What are Kansas’s securities laws exemptions?
Governmental entities; certain foreign governments; Financial institutions: banks (including international banking institutions), savings institutions, trust companies, savings and loan, credit unions, and bank or savings and loan holding companies, etc.; Other entities: railroads, public utilities and insurance companies; A federal covered security; A security listed or approved for listing on another securities market specified by rule; A put or a call option contract; a warrant; or a subscription right on or with respect to securities described in subsections (A) or (B); An option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the securities exchange act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the securities exchange act of 1934; An offer or sale of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; an option or a derivative security designated by the securities and exchange commission under section 9(b) of the securities exchange act of 1934; any stock or other security evidencing membership or ownership in, evidencing the right to patronize, issued in lieu of a cash patronage dividend by, or representing a debt of a cooperative organized under K.S.A. 17-1601 et seq., and amendments thereto, but the administrator, by rule or order, may require the filing of a notice and place conditions upon the exemption for sales of securities to persons who are not members within the meaning of K.S.A. 17-1606; 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 section or would be a federal covered security; Non-profit persons
What are Kansas’s procedures for securities law exemptions?
Applicable to: non-profit persons; Procedure may include: filing notice etc.
Frequently Asked Questions
Do I need an attorney from Kansas then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Kansas-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 Wichita, Kansas, that was going to be offered in different states, and you didn’t need counsel on questions related to Kansas 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 Kansas 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 Overland Park, Kansas, all of the investors were from Kansas, and you wanted to use one of Kansas’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Kansas.
Is it ok if the real estate syndication attorney, licensed outside of Kansas, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Kansas. 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 Kansas City, Kansas, 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.