Every state has its own “blue sky” or securities law that is designed to protect investors against fraudulent sales practices and activities independently of the federal securities laws. Blue sky laws may even require registration of, or at least notice filings with respect to, securities exempt from registration under federal law. For example, blue sky laws may still require a notice filing for offerings of securities issued or guaranteed by banks, often referred to as “bank notes,” even though these offerings are exempt from registration under Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). This article provides a brief overview of the blue sky laws and the application of such laws to offerings of bank notes. These laws are particularly relevant to the structured products market, as a number of significant issuers, to both institutional and retail investors, are U.S. and non-U.S. banks.

Blue sky laws are designed to protect investors against fraudulent sales practices and activities. While these laws can vary from state to state, most state laws typically require issuers to register their offerings before they can be sold in a particular state, unless the offerings are exempt from registration. These laws also license brokerage firms, their brokers and certain investment advisers and their representatives.