Community Bank & Wealth Management Group

CONNECT

Address:

42605 Moonridge Rd
Big Bear Lake, CA 92315

Phone:

(909) 584-4500

Fax/Other:

(909) 585-7220

Big Bear Toll Free: (800) 288-2811
Dublin Toll Free: (800) 394-9230

Mailing Address: P.O. Box 1688, Big Bear Lake CA 92315

CA License #0763476

Resources

What is Blue Sky?

"Blue Sky Laws" - are designed to protect investors against fraudulent sales practices and activities. While these laws do vary from state to state, most state laws typically require companies making offerings of securities to register their offerings before they can be sold in a particular state, unless a specific state exemption is available. The laws also license brokerage firms, their brokers, and investment adviser representatives.
 

How Does This Affect an Issuer?

Brokerage firms are prohibited from soliciting orders from individuals who reside in states where a stock is not registered (blue sky compliant). 

 

The industry standard for determining blue sky eligibility is a listing in Blue Sky Data Corp.’s records.

  • If your stock is not listed in its database as being eligible for a particular state, the vast majority of brokers will assume your stock is ineligible to trade in those specific states. 
  • This lack of clarity could restrict the marketing of your shares to both current and potential shareholders who reside in your local markets while still being available for purchase by out of state and institutional buyers. 

 

Offering shares to only a small percentage of the population is likely not consistent with your Board’s goal of enhancing shareholder value nor does it encourage local ownership!  This can negatively influence stock liquidity, stock price and the unique local shareholder composition that is so important to a company.

 

Additional information regarding Blue Sky Data Corp can be found HERE.

 

How Does This Affect Your Market Makers?

If a brokerage firm can only solicit orders in a few states, keeping an inventory of your stock may not be the best use of the firm’s capital and may compromise its risk management of your stock. 

 

Each individual states regulators can be found HERE.

 

What Are Your Options?

  1. Do nothing.While this may seem the easiest solution, carried to its logical conclusion, you may end up with a shareholder base of outsiders; maybe even undesirable shareholders, poor liquidity, poor stock performance and possibly a bit of liability to existing shareholders.

  1. Contact your state securities commission and learn how to become Blue Sky eligible. Keep in mind that you or the State will still be responsible for inclusion on Blue Sky Data Corp.’s list. This must be done on a state-by-state basis. If you currently have a dividend re-investment program, this could be quite expensive.

  2. Contact your Corporate Counsel as many of them maintain relationship with services that will provide Blue Sky compliance for numerous states at one time.  In additional, do not rule out that there could be an error in the State database that needs to be corrected.  Blue Sky compliance is a manual process in most states and there is the possibility of human error.

  3. List your company with Mergents Manual (if eligible for your state).

  4. List your shares on OTC Markets QX or QB trading platform which does allow for Blue Sky exemptions in as many as 30 states (currently) and may provide additional benefits for trading your stock.

 

Additional information regarding state filling requirements can be found HERE.

 

Helpful Resources:

North American Securities Administrators Association - Contact Your Regulator

 

North American Securities Administrators Association - State Filing Requirements

 

U.S. Securties Exchange Commission

 

OTC Markets

 

Blue Sky Data Corp

 

Mergent Manual

 

 

 

 

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Check the background of this financial professional on FINRA's BrokerCheck