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Blue sky laws are state laws regulating securities. They gained their unusual name from concerns that fraudulent securities offerings were so brazen and commonplace that issuers would sell building lots in the blue sky. In general, these laws predate the Securities Act of 1933 and the Securities Exchange Act of 1934 and were not preempted by those federal acts. In the 20-year period between 1911 and 1931, 47 of the existing 48 states adopted such laws.

Blue sky laws typically require the registration of any securities sold in the state, regulate broker-dealer and investment advisers, impose liability for false and misleading information relating to securities, and establish administrative agencies to enforce the laws. The registration requirements often include a “merit review” that gives the administrative agency ...

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