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Gregory Tendrich, PA Gregory Tendrich, PA

Florida “Blue Sky” Laws

The federal government’s authority over the U.S. securities market is far reaching. The FBI and the Justice Department investigate allegations of fraud. The Securities and Exchange Commission polices industry professionals and wrongdoing investors. Even FINRA’s oversight of brokers and brokerages has its roots in a federal law requiring its existence. Indeed, the federal securities law regime put in place in the wake of the Great Depression created widespread, uniform rules for interacting with securities in this country.

However, although the federal government is a primary actor in the regulation of securities, it is not the only actor: state securities laws—including in the state of Florida—live on.

The Florida Securities and Investor Protection Act

As the SEC itself describes, each state continues to have its own securities law regimes, known as “Blue Sky” laws (a term with roots in early twentieth century criticisms of fraudsters trying to sell innocent investors nothing more than the ‘blue sky’).

These laws, which attempt to protect against fraud, vary among the states. But they generally require registration of securities (similar to that which is required by federal law) when making offerings in that state. Over the past century, federal courts have found portions of Blue Sky laws preempted by federal law. But what remains of states’ abilities to protect themselves and their citizens is not negligible; and Florida is no exception to this rule.

The state has long had its own Blue Sky laws, and certain securities (that do not fall into the numerous exceptions or exempt transactions listed in the statute) are required to be registered with the state. But Florida goes further.

In 2009, Governor Crist signed an amended version of the Florida Securities and Investor Protection Act into law. Before its enactment, the Florida attorney general could not prosecute securities frauds (this was left to federal authorities). But in the aftermath of the financial crisis—and Florida’s unique vulnerability as home to many wealthy retirees—the state changed its laws.

The modern iteration of Florida’s Blue Sky laws gives added authority to the state to investigate and enforce anti-fraud provisions of the statute.

“We need every resource and every option available to protect our citizens from another Bernie Madoff-type scheme,” stated the Florida Attorney at the time.

Those seeking to register securities must today undergo increased scrutiny, through fingerprinting and criminal background checks. Those who have previously violated the law can be barred from registering securities again. Fines for violations have doubled. And, importantly, state officials can seek civil penalties on behalf of customers and restitution for those defrauded (in addition to other available remedies).

With ever more tools at prosecutors’ disposal, securities fraud in the state of Florida will hopefully be ever more difficult to perpetrate. It is no coincidence that the new Investor Protection Act was signed into law on the very same day Bernie Madoff was sentenced to prison.

If you have been the victim of financial exploitation or securities fraud, please do not hesitate to contact attorney Gregory Tendrich, P.A. to discuss your legal options today.

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