By: Tilden Moschetti, Esq.
Syndicators looking to raise capital from investors in Wisconsin should be aware of the Wisconsin’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Wisconsin‘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 Wisconsin’s Blue Sky Rules apply.
Here are the basic facts you need to know about giving notice to Wisconsin about your Reg D Rule 506b or 506c offer:
Filing fee – Fixed
New notice – $200
Late fee for late filings – None
WI ST 551.201 Exempt securities
WI ST 551.203 Additional exemptions and waivers
WI ST 551.204 Denial, suspension, revocation, condition, or limitation of exemptions; burden of proof; additional information
A security, including a revenue obligation or a separate security as defined in Rule 131 (17 CFR 230.131) adopted under the Securities Act of 1933, issued, insured, or guaranteed by the United States; by a state; by a political subdivision of a state; by a public authority, agency, or instrumentality of one or more states; by a political subdivision of one or more states; or by a person controlled or supervised by and acting as an instrumentality of the United States under authority granted by the Congress; or a certificate of deposit for any of the foregoing but any revenue obligation payable from payments to be made in respect of property or money used under a lease, sale, or loan arrangement by or for a nongovernmental industrial or commercial enterprise is exempt. Unless subject to a letter of credit of a bank, savings bank, or savings and loan association as provided in this paragraph, a revenue obligation of an issuer specified under par. (a) that is payable from payments to be made in respect of property or money used under a lease, sale, or loan arrangement by or for a nongovernmental industrial or commercial enterprise is exempt subject to rules adopted by the division of securities. A revenue obligation is exempt from any filing under the rules of the division if it is the subject of a guarantee or an irrevocable letter of credit from a depository institution in favor of holders of the revenue obligations providing for payment of all principal of the revenue obligations and all accrued and unpaid interest to the date of an event of default on the revenue obligations, and the letter of credit is accompanied by an opinion of counsel. A security issued, insured, or guaranteed by a foreign government with which the United States maintains diplomatic relations, or any of its political subdivisions, if the security is recognized as a valid obligation by the issuer, insurer, or guarantor. A security issued by and representing or that will represent an interest in or a direct obligation of, or be guaranteed by, any of the following: (a) An international banking institution. (b) A banking institution organized under the laws of the United States; a member bank of the Federal Reserve System; or a depository institution a substantial portion of the business of which consists or will consist of receiving deposits or share accounts that are insured to the maximum amount authorized by statute by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, or a successor authorized by federal law or exercising fiduciary powers that are similar to those permitted for national banks under the authority of the Comptroller of Currency pursuant to Section 1 of Public Law 87-722 (12 USC 92a). (c) Any other depository institution, unless by rule or order the administrator proceeds under s. 551.204. A security issued by and representing an interest in, or a debt of, or insured or guaranteed by, an insurance company authorized to do business in this state. A security issued or guaranteed by a railroad, other common carrier, public utility, or public utility holding company. A federal covered security; A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic, or reformatory purposes, or as a chamber of commerce, and not for pecuniary profit; A member’s or owner’s interest in, or a retention certificate or like security given in lieu of a cash patronage dividend issued by, a cooperative organized and operated as a nonprofit membership cooperative under the cooperative laws of a state; 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; A rule adopted or order issued under this chapter may exempt a security
That depends. If the offering you are putting together is under Regulation D and not one of the Wisconsin 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 Milwaukee, Wisconsin, that was going to be offered in different states, and you didn’t need counsel on questions related to Wisconsin 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 Wisconsin 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 Madison, Wisconsin, all of the investors were from Wisconsin, and you wanted to use one of Wisconsin’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Wisconsin.
They can look, but they can’t give you advice as it pertains to Wisconsin. 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 Green Bay, Wisconsin, 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!