Securities

State securities laws are commonly known as BLUE SKY LAWS because of an early judicial opinion that described the purpose of the laws as preventing "speculative schemes which have no more basis than so many feet of blue sky" (Hall v. Geiger-Jones, 242 U.S. 539, 372 S. Ct. 217, 61 L. Ed. 480 [1917]).

In 1956, the COMMISSIONERS ON UNIFORM LAWS approved the first Uniform Securities Act. A total of 37 states adopted the uniform law, though states frequently diverted from some of its provisions. The commissioners approved a second version of the act in 1985, but only six states adopted the revised version. A third version was approved in 2002. As of May 2003, the state of Missouri had adopted the 2002 version, and two other state legislatures were considering its adoption. Changes in the 2002 Uniform Securities Act include a simplified process for registering securities; more regulation of investment professionals; expanded enforcement powers of administrative agencies; new penalties for violations of the act; and several other changes.

Despite the existence of the various versions of the Uniform Securities Act, much diversity among state securities laws still exists. Typical provisions include prohibitions against fraud in the sale of securities, registration requirements for brokers and dealers, registration requirements for securities to be sold within the state, and sanctions and civil liability under certain circumstances. In addition to complying with the registration requirements of the 1933 act, a nationwide distribution of a new issue requires compliance with state blue sky provisions as well.

A majority of states have laws regulating takeovers of companies incorporated or doing business within the state. Although the courts have invalidated some of these statutes, these laws tend to aid in preserving the status quo of management.