Blue sky laws are the security laws of each state, differing from the Securities and Exchange Committee’s laws and rules that are national. These laws are designed to protect investors against false sales practices and activities.
While it is often thought that all security laws come from the Securities and Exchange Committee, the blue sky laws are state security laws that vary from state to state. Generally, the states require companies making small offerings to register their offerings before they can be sold in a particular state. By requiring the registering of offerings, investors know that the offerings are not fraudulent and are able to base their decision on reliable data.