What is the primary function of Blue Sky laws?

The primary function of Blue Sky laws is to govern the registration of securities. These laws were established by individual states in the U.S. to protect investors from fraudulent sales practices and securities offerings. Blue Sky laws require that securities offerings and sales within a state must be registered before they can be sold. This registration process involves disclosing relevant financial information about the securities and the companies offering them, making it difficult for fraudulent schemes to operate undetected.

By ensuring that investors receive adequate information before investing, Blue Sky laws help maintain a level of transparency in the trading of securities and foster investor confidence in the market. This regulatory framework is essential for protecting investors from the risks associated with unregistered offerings, which could lead to significant financial losses.