Syndicators looking to raise capital from investors in North Carolina should be aware of the North Carolina’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of North Carolina’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.
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 Regulation D offerings). 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 North Carolina’s Blue Sky Rules apply.
Here are the basic facts you need to know about giving notice to North Carolina about your Reg D Rule 506b or 506c offer:
Filing fee – Fixed
New notice – $350
Late fee for late filings – None
NC ST § 78A-10 Unlawful representations concerning registration or exemption
NC ST § 78A-16 Exempt securities
NC ST § 78A-18 Denial and revocation of exemptions
NC ST § 78A-24 Registration requirement
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.; Professional corporations; Cooperative organizations, electric or telephone membership corporations; Other entities: railroads, common carriers, public utilities, holding companies and insurance companies; Vessel lien secured bonds or notes; Listed stock exchange securities; Non-profit persons; Current transaction commercial paper; Employee benefit plan
Applicable to: listed stock exchange securities; Procedure includes: approval by Administrator rule
That depends. If the offering you are putting together is under Regulation D and not one of the North Carolina 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 Charlotte, North Carolina, that was going to be offered in different states, and you didn’t need counsel on questions related to North Carolina 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 North Carolina 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 Raleigh, North Carolina, all of the investors were from North Carolina, and you wanted to use one of North Carolina’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in North Carolina.
They can look, but they can’t give you advice as it pertains to North Carolina. 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 Greensboro, North Carolina, 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.
Contact our syndication and private placement memorandum law firm today!