blue sky laws

Blue Sky Laws

State regulations 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.

Investopedia Commentary

The term is said to have originated in the early 1900s when a Supreme Court justice declared his desire to protect investors from speculative ventures that had "as much value as a patch of blue sky."

Related Links

Investment Scams Tutorial

See also: Boiler Room, Bucket Shop, Bucketing, Churning, Circular Trading, Front Running, OTC Market, Poop and Scoop, Pump and Dump, SEC

blue sky laws

State regulations that cover the offering and sale of securities within state boundaries. Although the laws differ among states, most include provisions relating to fraudulent activities and the licensing of individuals who sell securities. The term derives from an effort to protect investors from unwittingly buying a piece of blue sky.

Main Entry: blue–sky law
Function: noun
: a law providing for the regulation (as through registration) of the sale of securities (as stock) for the purpose of preventing fraud