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Ohio Blue Sky Laws for Syndication

By: Tilden Moschetti, Esq.

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

 

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

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

Filing fee – Fixed

New notice – $100

Late fee for late filings – $100 > 15 days after the date of first sale

 

What are Ohio’s Blue Sky Laws?

OH ST § 1707.02 Exempt securities

OH ST § 1707.04 Issuance of securities in reorganization

OH ST § 1707.09 Registration by qualification; application for qualification

OH ST § 1707.45 Burden of proof

 

What are Ohio’s securities laws exemptions?

Governmental entities including government corporations; certain foreign governmental entities; Financial institutions: banks, savings banks, savings and loan and credit unions; Interim certificates; Listed stock exchange securities etc.; Industrial or economic development, and port authority bonds; Other entities: public utilities and insurance companies; Non-defaulted 5-year + securities; Non-profit persons, corporations etc.; Commercial paper; Reorganization plan etc. related securities

 

What are Ohio’s procedures for securities law exemptions? 

Applicable to: reorganization plan etc. related securities; Procedure includes: filing application, notice of hearing, $100 fee, deposit of costs and division approval

 

Frequently Asked Questions

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

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

 

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

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

Make informed decisions about your syndication.

Contact our syndication and private placement memorandum law firm today!