Series 66

Foundation for Regulatory Issues - Introduction

Blue Sky Laws
Each state has its own securities regulations, which are known as Blue Sky Laws. The USA clarifies who has jurisdiction if a securities violation occurs, while also specifying the powers of each state's Administrator.


State regulations are designed to protect investors against securities fraud by requiring sellers of new issues to register their offerings and provide financial details. This allows investors to base their judgments on trustworthy data.
 

Look Out!
The main objective of Blue Sky Laws is to protect investors from fraudulent activity.


Uniform Securities Act (USA)
The Uniform Securities Act (USA) is not an actual set of laws. It is, however, documented guidance for each state to use as a template when forming securities related legislation. We have included the entire updated USA within Appendix C, at the end of this guide.

 

Look Out!
It is important to know that the USA is not actual legislation, but rather "model" legislation, meaning it is merely a "template" that each state uses in drafting its own legislation
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Any resemblance the USA may have to Blue Sky Laws comes from the massive amount of securities related fraud that was widespread in the first half of the 20th century. Stock promoters would often con individual investors into purchasing investments that had no reasonable basis, and with the lack of any uniformity between states, it was very difficult to prosecute the shysters - assuming they were ever caught. Thus, the United States saw the emergence of Blue Sky Laws and, later, the Uniform Securities Act.
 

Look Out!
The primary purpose of the USA is to regulate securities professionals and the sale of securities.

 

Exam Tips and Tricks
Because most states simply mirror the model legislation of the USA, you will be tested on the USA itself, not on individual state regulations. The bullet points below outline the origins of the USA.


State securities law varied widely from state to state in the first half of the 20th century, despite the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934.

  • To unify (streamline) state security laws, the National Conference of Commissioners on Uniform State Laws (NCCUSL) drafted the USA in 1956. The NCCUSL was a national organization of legal professionals devoted to creating legal congruency from state to state.
     
  • The USA provides criminal and civil penalties for violations - that is, for fraudulent acts done to deceive investors.

On its website, the NCCUSL states: "The state uniform law commissioners come together as the National Conference for one purpose - to study and review the law of the states to determine which areas of law should be uniform."

Now that you know how and why the USA came to be, let's take a closer look at the nuts and bolts of the legislative template. Keep the following items in the back of your mind as you work through this section of the study guide - they are what the NCCUSL wants you to know.




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