Syndicators looking to raise capital from investors in New York should be aware of the New York’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of New York’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 New York’s Blue Sky Rules apply.
What if I Need to Notify New York about my Regulation D Syndication?
Filing fee – Variable
New notice – $300 ‐ $1,200
Late fee for late filings – None
What are New York’s Blue Sky Laws?
NY GEN BUS § 352-g Exemptions
NY GEN BUS § 352-i Injunctive relief
NY GEN BUS § 352-j Application of article
NY GEN BUS § 359-e Definitions. Registration requirements
NY GEN BUS § 359-f Exemptions from certain provisions of section three hundred fifty-nine-e
NY GEN BUS § 359-ff Registration of intra-state offerings
What are New York’s securities laws exemptions?
- 359-f exemptions: Governmental entities; certain foreign governments including Canada; Financial institutions: banks, land banks, farm loan associations, trust companies, savings institutions or banks; Non-profit corporations and other corporations meeting certain conditions; Other entities: public service or utility corporations; Commercial paper or negotiable documents of title etc.; Undivided whole bond and mortgage; Court or other fiduciary type sales etc.; Debt liquidation securities; Listed stock exchange securities; Limited offerings to maximum of 40 persons; Employee benefit plan; Real estate offerings: exemptions include §359-f(2) and §352-g; In-state offerings: listed exemptions include certain §359-f exemptions.
What are New York’s procedures for securities law exemptions?
Application to: 352-g exemptions; Procedure includes: application; Application to: 359-f exemptions; Procedure includes: written application and $300 fee if granted
Frequently Asked Questions
Do I need an attorney from New York then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the New York 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 New York City, New York, that was going to be offered in different states, and you didn’t need counsel on questions related to New York 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 New York 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 Buffalo, New York, all of the investors were from New York, and you wanted to use one of New York’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in New York.
Is it ok if the real estate syndication attorney, licensed outside of New York, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to New York. 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 Yonkers, New York, 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.