blue sky laws

Legislation in the USA that hands responsibility for regulating and policing the issue of securities to the state in which the securities are being issued.

The laws were introduced by 47 US states between 1911 and 1931. The justification for these laws was ostensibly to prevent the sale of fraudulent securities to unsophisticated investors. The term ‘blue sky’ is said to originate from the supporters of the laws who claim that some securities were so dishonest they would sell ‘building lots in the sky’.