STATE SECURITIES REGULATION
State securities laws were first enacted in the United States in 1911. Challenges to the early securities laws of the various states on Constitutional grounds were unsuccessful. When Congress enacted the federal securities laws in the 1930s, it preserved the rights of the states to have securities laws.
SECTION 18 OF THE SECURITIES ACT OF 1933, 15 U.S.C. § 77r (1988)
SECTION 28(a) OF THE SECURITIES EXCHANGE ACT OF 1934, 15 U.S.C. § 78bb(a) (1988)
Over the years, the states have had national associations such as the North American Securities Administrators Association (NASAA), and the Midwest Securities Commissioners Association that disbanded in 1980, in order to achieve a certain amount of uniformity in the state securities laws.
In 1956, the National Conference of Commissioners on Uniform State Laws adopted the Uniform Securities Act. In 1985, the National Conference of Commissioners on Uniform State Laws adopted the Revised Uniform Securities Act.
Many states have adopted most or a significant portion of the original Uniform Securities Act, and some states are presently considering the revised version.
Section 101 of the Uniform Securities Act provides that it is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly, to defraud, to make any untrue statement of a material fact, or to omit to state a material fact.
Section 102 of the Uniform Securities Act provides that it is unlawful for any person who receives any consideration from another person primarily for advising the other person as to the value of securities or their purchase and sale to defraud the other person.
Section 201 of the Uniform Securities Act provides that it is unlawful for any person to transact business in the state as a broker-dealer, agent, or investment adviser unless registered, which registration is subject to annual renewal.
Section 301 of the Uniform Securities Act provides for a requirement that any security must be subject to registration before offered or sold in the state unless the security or transaction is exempt.
One of the most glaring and controversial aspects of many states securities laws is the merit regulation of securities offerings. Unlike federal securities laws, which are based on full disclosure to investors, merit regulation allows the state to register only those securities offerings that meet certain fair, just and equitable standards.
The parties to modern securities transactions can very well reside in different states in the United States. While most attorneys and business executives are aware of the existence of the various federal securities statutes and the various state securities laws, they usually exhibit surprise to learn that routine business transactions can often involve these federal and state securities laws. It is possible to have several different state securities laws involved in the same domestic transaction. Because business transactions often take place between parties residing in different states or with legal entities domiciled in different states, more than one state securities law could have an effect on the transaction. As a result, such domestic transactions can involve the state securities laws of several states at the same time.
Section 1904 of the Federal Securities Code proposes to preempt state securities laws unless the state securities commission has a procedure for registering a distribution of securities substantially coordinated with the procedure of the Securities and Exchange Commission, and to require the state to accept the federal registration statement and offering statement.
Section 514 of the Federal Securities Code proposes to provide for a local distribution, being one that results in sales substantially restricted to persons who are residents of, or employed primarily in, a single State, or an area in contiguous States, or a State and a foreign country, if such area meets a definition based on consideration of its population and economic characteristics, and involves securities of an issuer that does business primarily in that State or area, regardless of where organized, and also to extend to a local distribution by a secondary distributor, whether or not a resident of the State or area, but only if the secondary distributor did not buy securities of the same class in connection with a limited offering.
Broker-Dealers and their Agents must register with states where they do business. This registration is done on the Central Registration Depository (CRD) system. This is a computerized database. Investment Advisers now register with the state where their principal place of business is located or with the United States Securities and Exchange Commission. Investment Advisers with $25 million or more under management must register with the SEC. Those with less than $25 million under management must register with the local state. A computerized database for Investment Advisers and their Representatives is currently being organized. Registration will be done on this Investment Adviser Registration Depository (IARD) system once completed.
REPORT ON THE UNIFORMITY OF STATE REGULATORY REQUIREMENTS FOR OFFERINGS OF SECURITIES THAT ARE NOT “COVERED SECURITIES”, Securities and Exchange Commission (1997)
A.S. GOLDMEN & CO., INC. v. NEW JERSEY BUREAU OF SECURITIES, 163 F.3d 780 (3d Cir. 1999)
OFFERS DISSEMINATED THROUGH THE INTERNET, Texas State Securities Board, Title 7, Section 139.17 (1996)
DEALER AND INVESTMENT ADVISER USE OF THE INTERNET TO DISSEMINATE INFORMATION ON PRODUCTS AND SERVICES, Texas State Securities Board, Title 7, Section 139.18 (1997)
© 2000 Harry Stansbury
 See 1 LOUIS LOSS & JOEL SELIGMAN, SECURITIES REGULATION 39-148 (3d ed. 1989 & Supp. 1990); Milton H. Gray, Blue Sky Practice - A Morass?, 15 Wayne L. Rev. 1519, 1523-24 (1969); Louis Loss, The Harvard Law School Study of State Securities Regulation, Harv. L. Sch. Bull., Dec. 1954, at 9.
 1 BLUE SKY L. REP. (CCH) ¶¶ 5500-73.
 1 BLUE SKY L. REP. (CCH) ¶¶ 5591-707.
 See F.L. Liebolt, Jr., The Revised Uniform Securities Act - Is ABA Endorsement in the Offing?, 45 Bus. Law. 1333, 1334 (1990); Note, Secondary Trading in Securities: Labyrinth Beneath the Blue Sky, 1969 Wash. U.L.Q. 41, 42-43 & n.9 (1969).
 UNIF. SECURITIES ACT, 7B U.L.A. 509, 516 (master ed. 1985).
 UNIF. SECURITIES ACT, 7B U.L.A. 509, 525-26 (master ed. 1985).
 UNIF. SECURITIES ACT, 7B U.L.A. 509, 528 (master ed. 1985).
 UNIF. SECURITIES ACT, 7B U.L.A. 509, 550 (master ed. 1985).
 See JOHN BROOKS, THE TAKEOVER GAME 42-43 (1987); see, e.g., Sam Adler, Mid-Sized Firms Turning to Blue-Sky Specialists, Manhattan Law., Apr. 4-10, 1989, at 5.
 See LOUIS LOSS, FUNDAMENTALS OF SECURITIES REGULATION 11-14 (2d ed. 1988).
 See Conrad G. Goodkind, Blue Sky Law: Is There Merit in the Merit Requirements?, 1976 Wis. L. Rev. 79, 79-87 (1976).
 See Hugh H. Makens, Who Speaks for the Investor? An Evaluation of the Assault on Merit Regulation, 13 U. Balt. L. Rev. 435, 437-43 (1984).
 See JOSEPH C. LONG, BLUE SKY LAW § 1.02 at 1-2 to 1-5 (1985); see, e.g., Guy C. Lyman, Jr., Securities Regulation in Louisiana - A Practical Introduction to the Blue Sky Law, 16 La. B.J. 327, 327-28 (1969).
 See 1 LOUIS LOSS, SECURITIES REGULATION 23-107 (2d ed. 1961); LOUIS LOSS & EDWARD M. COWETT, BLUE SKY LAW 3-42 (1958). See generally Harry C. Stansbury, A Primer on Securities Regulation in Louisiana, 13 La. Corp. Newsl. No. 1 (La. St. B. Ass'n Sec. on Corp. & Bus. L., New Orleans, La.), Fall 1990.
 See JOSEPH C. LONG, BLUE SKY LAW § 3.01 at 3-2 to 3-5 (1985); see also Joseph C. Long, State Securities Regulation: An Overview, 32 Okla. L. Rev. 541, 579-97 & n.193 (1979).
 See Thomas L. Krebs & David R. Donaldson, Securities Litigation in Alabama: Open Shirts, Gold Chains and Pinkie Rings: A Guide for Widows and Orphans, 20 Cumb. L. Rev. 481, 594-97 (1990).
 FEDERAL SECURITIES CODE § 1904 (1980).
 See Jeffrey B. Bartell, Federal-State Relations Under the Federal Securities Code, 32 Vand. L. Rev. 457, 470-87 (1979).
 FEDERAL SECURITIES CODE § 514 (1980).
 See Jeffrey B. Bartell, Federal-State Relations Under the Federal Securities Code, 32 Vand. L. Rev. 457, 487-91 (1979).