Blue Sky laws
Laws passed by individual states to protect investors against securities fraud. Requires sellers of new stock issues or mutual funds to register their offerings and provide financial detail.

State Authority over Federal Covered Securities
A State Administrator cannot require the registration of federal covered securities in the state. Federal covered securities include any of the securities listed below:

  • Exchange Listed Securities -This refers to any security listed on the New York Stock Exchange, American Stock Exchange or Nasdaq, as well as senior securities (such as preferred stocks and bonds of a company whose stock is so listed).
  • Investment Company Shares -This refers to mutual fund shares issued by a registered investment company and sold to qualified purchasers (an individual with at least $5,000,000 in investments or investment managers with at least $25,000,000 in assets under management).

Initial Public Offering - A state Administrator cannot require registration of IPOs, but they can require a notice filing in the state and a payment of a filing fee.

State Registered Investment Advisors
Some IAs must register with the state rather than with the SEC. If you register through your state, you are regulated by the Uniform Securities Act instead of the Investment Advisers Act of 1940. Under the Uniform Securities Act, you must register as an investment advisor if you provide any of the following services for compensation:
  • Engaging in the business of advising others, either directly or indirectly (such as via a newsletter), as to the value of securities or the advisability of investing in securities; OR
  • Issuing analyses or reports on a regular basis as part of a business; OR
  • Providing investment advisory services to others in a financial planning practice.

An IA must register in every state where he or she does business with clients, whether or not he/she actually maintains a place of business in the state. The only exemption is for advisors with no place of business in a state who:
  • Only deal with institutional investors; OR
  • Have five or less clients in that state.

If an existing client is temporarily visiting another state, the IA is not subject to registration requirements in the second state.

Insurance regulation
Regulation of insurance companies, brokers and agents is handled by individual states. Many states adopt regulations and laws developed by the National Association of Insurance Commissioners (NAIC).
  1. Licensing - Insurance agents who sell insurance products generally must obtain a license from their home state. Includes financial planners who sell insurance products.
  2. Licensing of financial planners - In some states, financial planners who make generic recommendations about insurance coverage for a client may be subject to state registration or licensing.


Business Law: Contracts

Related Articles
  1. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  2. Financial Advisor

    Financial Planners: Practice What You Preach

    "Do as I say and not as I do" doesn't make for a great professional reputation.
  3. Financial Advisor

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  4. Financial Advisor

    Differences Between Stockbrokers, Investment Advisors And Financial Planners

    Find out how these three financial positions differ and in which areas they can help you with your finances.
  5. Tech

    The Devil Is in the Details With New Advisor Rules

    Don’t be lured into a false sense of security with advisors because of the new DoL ruling. Due diligence is still a must when it comes to fee disclosures.
  6. Insurance

    Becoming An Insurance Agent

    Few careers match the opportunity for as quick and large a paycheck as does being a life insurance agent.
  7. Managing Wealth

    Trending Toward Asset-Based Management

    Will charging fees instead of commission increase your client base?
  8. Financial Advisor

    Is Your Broker Legit? 6 Steps to Take

    The Great Recession may have ended, but broker wrongdoing hasn't. Here's how to make sure you don't get stuck with the next Bernie Madoff.
  9. Trading

    Financial Regulators: Who They Are And What They Do

    Find out how these government agencies govern the financial markets.
  10. Financial Advisor

    State Guarantee Associations: The Payer of Last Resort

    What's covered and what happens if your insurance company is in financial trouble and can't pay your claim?
Frequently Asked Questions
  1. What are the Differences Between Affiliate, Associate and Subsidiary Companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. Read on to find ...
  2. What Does it Mean if the Correlation Coefficient is Positive, Negative, or Zero?

    Learn what the correlation coefficient between two variables is and what positive, negative and zero correlation coefficients ...
  3. What's the Difference Between a Market Economy and a Command Economy?

    Set by supply and demand, a market economy operates through a price system; in a command economy, governments control the ...
  4. What Factors Cause Shifts in Aggregate Demand?

    Find out how aggregate demand is calculated in macroeconomic models. See what kinds of factors can cause the aggregate demand ...
Trading Center