What Is A Blue Sky Agreement


Kansas Banking Commissioner Dolley, who lased out at “blue sky merchants” while lobbying for the passage of Kansas law in 1910, noted that some fraudulent investments were supported only by Kansas` blue skies. The Oxford English Dictionary has a cited use dating back to 1906. The New York Times (and other national newspapers) also frequently reported on blue sky laws when various states began enacting them between 1911 and 1916. Newspapers have explicitly used the term blue sky to describe such laws. In general, Blue Sky laws date back to before the Securities Act of 1933 and the Securities Exchange Act of 1934 and were not provided for by these federal laws. Until 1931, almost every U.S. state had laws regulating the sale of securities. The Blue Sky laws, which are used in most U.S. states today, are based on the Uniform Securities Act (USA) of 1956, which was drafted by federal lawmakers to serve as a model for states to create their own laws.

Although most states endorsed a form of the United States, many made variations in it, resulting in significant differences from state to state. U.S. legal interpretations can also vary greatly from state to state. Therefore, actions that can be considered fraudulent in the United States in one state cannot be considered fraudulent in another state. The first Blue Sky Act was enacted in Kansas in 1911 at the urging of its banking commissioner, Joseph Norman Dolley, and served as a model for similar laws in other states. Between 1911 and 1933, 47 states passed Blue Sky laws (Nevada was the only one resisting[1]). Today, the Blue Sky laws of 40 of the 50 states follow the Uniform Securities Act of 1956. Historically, federal securities laws and state Blue Sky laws often complemented and duplicated each other. Much of the duplication of work, particularly with respect to securities registration and the regulation of dealers and advisors, was largely avoided by the Securities and Exchange Commission with the National Securities Markets Improvement Act of 1996 (NSMIA). However, this law has left some regulation of investment advisors and much of the fraud litigation under the jurisdiction of the state.

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