Syndicators looking to raise capital from investors in Maryland should be aware of the Maryland’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Maryland‘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 Maryland’s Blue Sky Rules apply.
What if I Need to Notify Maryland about my Regulation D Syndication?
Filing fee – Fixed
New notice – $100
Late fee for late filings – $150 > 15 days after first sale in state
What are Maryland’s Blue Sky Laws?
MD CORP & ASSNS § 11-304 Prohibited representations concerning effect of registration or exemption.
MD CORP & ASSNS § 11-501 Sales of registered or exempt securities.
MD CORP & ASSNS § 11-601 Securities exempted
MD CORP & ASSNS § 11-603 Exemption revoked
MD CORP & ASSNS § 11-604 Proof of exemption
What are Maryland’s securities laws exemptions?
Governmental entities; certain foreign governments including Canada; Financial institutions: banks, savings institutions, trust companies, savings and loan, building and loan, credit unions, industrial loan associations etc.; Electric cooperatives; Other entities: railroads, common carriers, public utilities, holding companies and insurance companies; Listed stock exchange securities etc.; Clearing agency options; Exempt security under Securities Exchange Act of 1934; Non-profit persons; Current transaction commercial paper; Employee benefit plan.
What are Maryland’s procedures for securities law exemptions?
Applicable to: non-profit persons; Procedure may include: filing notice; Applicable to: employee benefit plan; Procedure may include: notice of plan; Applicable to: exempt security under Securities Exchange Act of 1934; Procedure may include: filing notice
Frequently Asked Questions
Do I need an attorney from Maryland then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Maryland 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 Baltimore, Maryland, that was going to be offered in different states, and you didn’t need counsel on questions related to Maryland 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 Maryland 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 Columbia, Maryland, all of the investors were from Maryland, and you wanted to use one of Maryland’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Maryland.
Is it ok if the real estate syndication attorney, licensed outside of Maryland, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Maryland. 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 Germantown, Maryland, 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.