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Utah Blue Sky Laws for Syndication

By: Tilden Moschetti, Esq.

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

 

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

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

Filing fee – Variable

New notice – $0 – $100

Late fee for late filings – $500 > 15 days, in lieu of new notice fee

 

What are Utah’s Blue Sky Laws?

UT ST § 31A-5-301 Securities regulation

UT ST § 61-1-7 Registration before sale

UT ST § 61-1-11 Provisions applicable to registration generally

UT ST § 61-1-14 Exemptions

UT ST § 61-1-14.5 Burden of proving exemption

UT ST § 61-1-17 No finding by division on merits–Contrary representation unlawful

 

What are Utah’s securities laws exemptions?

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.; Agricultural cooperative associations; Open-end management investment companies or unit investment trusts; Other entities: public utilities and holding companies; Listed stock exchange securities; Non-profit persons; Commercial paper obligations; Employee benefit plan

 

What are Utah’s procedures for securities law exemptions? 

Applicable to: notice or application for exemption; Procedure includes: filing fee; Applicable to: open-end management investment companies or unit investment trusts; Procedure includes: notice of intent to sell and filing fee

 

Frequently Asked Questions

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

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

 

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

They can look, but they can’t give you advice as it pertains to Utah. 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 West Jordan, Utah, 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!