Syndicators looking to raise capital from investors in Washington should be aware of Washington’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Washington’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 Washington’s Blue Sky Rules apply.
What if I Need to Notify Washington about my Regulation D Syndication?
Filing fee – Fixed
New notice – $300
Late fee for late filings – None
What are Washington’s Blue Sky Laws?
WA ST 21.20.140 Unlawful to offer or sell unregistered securities–Exceptions
WA ST 21.20.310 Securities exempt from registration
WA ST 21.20.325 Denial, revocation, condition, of exemptions–Authority–Procedure
WA ST 21.20.340 Fees–Disposition
WA ST 21.20.360 Filing, registration, statement, exemption not conclusive as to truth or completeness–Unlawful representations
WA ST 21.20.540 Exemptions, exceptions, and preemptions–Burden of proof
What are Washington’s securities laws exemptions?
Governmental entities; certain foreign governments including Canada; Financial institutions: banks, trust companies, savings and loan, building and loan, credit unions and industrial loan associations etc.; Investment grade securities; Charitable gift annuities; Other entities: railroads, common carriers, public utilities, holding companies, and insurance companies; Non-profit organizations; Current transaction commercial paper; Employee benefit plan
What are Washington’s procedures for securities law exemptions?
Applicable to: employee benefit plan; Procedure may include: written notice with plan copy; Applicable to: non-profit organizations; Procedure includes: filing notice of terms, $50 filing fee and 10 day review period
Frequently Asked Questions
Do I need an attorney from Washington then to put together an offering?
That depends. If the offering you are putting together is under Regulation D and not one of the Washington-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 Seattle, Washington, that was going to be offered in different states, and you didn’t need counsel on questions related to Washington 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 Washington 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 Spokane, Washington, all of the investors were from Washington, and you wanted to use one of Washington’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Washington.
Is it ok if the real estate syndication attorney, licensed outside of Washington, looks over my purchase contract?
They can look, but they can’t give you advice as it pertains to Washington. 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 Tacoma, Washington, 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.