Syndicators looking to raise capital from investors in Rhode Island should be aware of the Rhode Island’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Rhode Island’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 Rhode Island’s Blue Sky Rules apply.
Here are the basic facts you need to know about giving notice to Rhode Island about your Reg D Rule 506b or 506c offer:
Filing fee – Fixed
New notice – $300
Late fee for late filings – None
RI ST § 7-11-301 Registration requirement
RI ST § 7-11-401 Exempt securities
RI ST § 7-11-403 Provisions applicable to exemptions generally
RI ST § 7-11-505 Unlawful representations concerning licensing, registration, or exemption
Governmental entities; certain foreign governments including Canada; Financial institutions: depository institutions; Non- profit membership cooperatives; Open-end management investment companies or unit investment trusts; Other entities: railroads, common carriers, public utilities, holding companies and insurance companies; Equipment trust certificates; Listed stock exchange securities and clearing agency options etc.; Non-profit persons; Commercial paper obligations; Employee benefit plan
Applicable to: open-end management investment companies or unit investment trusts; Procedure includes: notice of intent to sell and filing fee of $1000
That depends. If the offering you are putting together is under Regulation D and not one of the Rhode Island 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 Providence, Rhode Island, that was going to be offered in different states, and you didn’t need counsel on questions related to Rhode Island 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 Rhode Island 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 Warwick, Rhode Island, all of the investors were from Rhode Island, and you wanted to use one of Rhode Island’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Rhode Island.
They can look, but they can’t give you advice as it pertains to Rhode Island. 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 Cranston, Rhode Island, 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!