Minnesota Blue Sky Laws for Syndication

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

 

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

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

Filing fee – Fixed and Variable

New notice – Fixed: $100, Variable:  .1% of state offering max $200

Late fee for late filings – None

 

What are Minnesota’s Blue Sky Laws?

MN ST § 80A.45 Section 201; exempt securities

MN ST § 80A.461 MNvest registration exemption

MN ST § 80A.47 Section 203; additional exemptions and waivers

MN ST § 80A.48 Section 204; denial, suspension, revocation, condition, or limitation of exemptions

 

What are Minnesota’s securities laws exemptions?

  1. 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; Non-profit persons

MNvest registration exemption

 

Frequently Asked Questions

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

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

 

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

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

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