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West Virginia Blue Sky Laws for Syndication

By: Tilden Moschetti, Esq.

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

 

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

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

Filing fee – Fixed and Variable

New notice – $125

Late fee for late filings – $420‐$1,800 >15 days after first sale in state ; .18750% of amount oversold

 

What are West Virginia’s Blue Sky Laws?

WV ST § 32-3-301 Registration requirement

WV ST § 32-4-402 Exemptions

WV ST § 32-4-405 Unlawful representations concerning registration, exemption or notice filing

 

What are West Virginia’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 and industrial loan associations etc.; Agricultural or foreign cooperative associations; Other entities: railroads, common carriers, public utilities, holding companies, and insurance companies; Listed stock exchange securities etc.; Non-profit persons; Current transaction commercial paper; Employee benefit plan

 

What are West Virginia’s procedures for securities law exemptions? 

Applicable to: employee benefit plan; Procedure includes: written notice of plan

 

Frequently Asked Questions

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

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

 

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

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