By: Tilden Moschetti, Esq.
Syndicators looking to raise capital from investors in Vermont should be aware of the Vermont’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Vermont‘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 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 Vermont’s Blue Sky Rules apply.
Here are the basic facts you need to know about giving notice to Vermont about your Reg D Rule 506b or 506c offer:
Filing fee – Fixed
New notice – $600
Late fee for late filings – None
VT ST T. 9 § 5201 Exempt securities
VT ST T. 9 § 5203 Additional exemptions and waivers
VT ST T. 9 § 5204 Denial, suspension, revocation, condition, or limitations of exemptions
VT ST T. 9 § 5301 Securities registration requirement
VT ST T. 9 § 5503 Evidentiary burden
VT ST T. 9 § 5506 Misrepresentations concerning registration or exemption
VT ST T. 9 § 5608 Uniformity and cooperation with other agencies
Governmental entities; certain foreign governments; Financial institutions: banks (including international banking institutions), savings institutions, trust companies, savings and loan, credit unions, and bank or savings and loan holding companies, etc.; Other entities: railroads, public utilities and insurance companies; A federal covered security; A security listed or approved for listing on another securities market specified by rule; A put or a call option contract; a warrant; or a subscription right on or with respect to securities described in subsections (A) or (B); An option or similar derivative security on a security or an index of securities or foreign currencies issued by a clearing agency registered under the securities exchange act of 1934 and listed or designated for trading on a national securities exchange, a facility of a national securities exchange, or a facility of a national securities association registered under the securities exchange act of 1934; An offer or sale of the underlying security in connection with the offer, sale, or exercise of an option or other security that was exempt when the option or other security was written or issued; An option or a derivative security designated by the securities and exchange commission under section 9(b) of the securities exchange act of 1934; Any stock or other security evidencing membership or ownership in, evidencing the right to patronize, issued in lieu of a cash patronage dividend by, or representing a debt of a cooperative organized under K.S.A. 17-1601 et seq., and amendments thereto, but the administrator, by rule or order, may require the filing of a notice and place conditions upon the exemption for sales of securities to persons who are not members within the meaning of K.S.A. 17-1606; An equipment trust certificate with respect to equipment leased or conditionally sold to a person, if any security issued by the person would be exempt under this section or would be a federal covered security; Non-profit persons
That depends. If the offering you are putting together is under Regulation D and not one of the Vermont 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 Burlington, Vermont, that was going to be offered in different states, and you didn’t need counsel on questions related to Vermont 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 Vermont 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 Essex, Vermont, all of the investors were from Vermont, and you wanted to use one of Vermont’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Vermont.
They can look, but they can’t give you advice as it pertains to Vermont. 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 South Burlington, Vermont, 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!