In this video, Kim Lisa Taylor, founder of Syndication Attorneys, explains the often‑overlooked state‑level “Blue Sky” notice filing requirement for real‑estate syndicators and fund managers using the SEC’s Regulation D Rule 506 exemption. She outlines the legal background, noting that while Rule 506 pre‑empted many state registration requirements, each state still demands a notice filing within 15 days of the first sale to an investor in that state, accompanied by a filing fee (ranging from under $100 to $1,200 in New York; Florida is the only state that currently exempts the filing). Taylor details the mechanics of the filing—submitting the SEC Form D plus any state‑specific form, often through NASAA’s central repository—and emphasizes the need to file separately in every state where investors reside. She identifies why syndicators frequently miss these filings: attorney engagement scopes, timing of investor admissions, and lack of internal responsibility. The video describes the potential repercussions of missing or late filings, including state investigations, penalties, loss of the exemption, rescission obligations, and heightened regulatory scrutiny. Taylor advises concrete best‑practice steps: assign a team member to track investor locations and inform counsel, obtain written confirmation of each state filing, and embed the process in company policy. She references Chapter 10 of her book for a consolidated guide and offers her firm’s review and consultation services for syndicators needing assistance.
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You filed your Form D with the SEC. Your attorney confirmed it was submitted. You have a confirmation. On the federal side, you're done. One question: did you also file notices in every state where your investors live? That's a separate filing called a Blue Sky filing. Different forms, different fees, a 15-day deadline from the first sale in each state. If that's the first time you've heard this, That's what this video is about. My name is Kim Lisa Taylor. I'm the founder of Syndication Attorneys. I work exclusively with real estate syndicators and fund managers on Reg D offerings. Let me start with where this requirement comes from. Before Regulation D, Rule 506 became available for multi-state private securities offerings under the Federal Securities Act of 1933, Each state had its own private securities offering regulations. State laws governed private securities offerings to investors in every state. Whether a filing, a registration, qualification, or pre-approval was needed depended on the issuer, type of security offering, offering terms, investor mix, and every state had a completely different set of rules. If you wanted to bring in investors from multiple states, you had to separately ensure compliance with the rules of The SEC's Rule 506 exemption from securities registration and a subsequent act called NSMIA finally preempted the fragmented state private offering exemption system. Today, raising capital under the Rule 506 federal exemption no longer requires advance approval from any state, but states still require that capital raisers who use the Rule 506 exemption file notices within 15 days of the first sale of securities in their state, along with payment of an associated filing fee. Florida is the only state that currently doesn't require a securities notice filing for a Rule 506 offering. The state notices are called Blue Sky notice filings— not a request for permission, a notification— still required, and it has a deadline. Here's what's actually due and when. When you accept your first investment from an investor in a new state, you have 15 days to file a Blue Sky notice in that state. The filing itself is typically made by submitting a copy of your filed SEC Form D plus a state-specific form. Some states have their own form, some accept the federal Form D alone. Most states offer filings through a central repository maintained by the North American Securities Administrators Association, or NASAA. Each state also requires a filing fee that varies by state. Fees range from under $100 in some states to several hundred dollars in others, with the highest being $1,200 in New York. Some state fees depend on the amount being raised and/or the deal structure. You must file separately in every state where you have investors, but only one time per state. If you have investors in 8 states, you have 8 Blue Sky filings. If you're syndicating nationally, which most of our clients do because they meet investors at nationwide events and conferences, you may have investors in 15 or 20 states. That's 15 or 20 separate filings per offering. The more you raise, the more states you're likely to have. The Form D confirmation email from the SEC tells you your federal filing was received. It says nothing about the state filings. Here's why syndicators miss this, even when they have an attorney. Attorneys may scope their engagement as draft the PPM, draft the operating agreement, draft the subscription agreement, and some may include additional entities such as the sponsor entity or separate title-holding entities, depending on the size and type of project you have. Sometimes They'll include the Form D filing, or they may charge a separate fee to file it. Blue Sky filings may be included, but often they are provided as a separate service on the client's request with a separate fee, and the client is always responsible for the state filing fees. All of this should be explicitly discussed and included in your engagement letter with your attorney. Many syndicators and fund managers forget to file state securities notices. Or to ask their attorneys to do so, even if blue sky filings are an included legal service. It happens because investors come in from different states at different times, and it's easy for a sponsor to lose track of the states where filings have already been made and those that haven't, or to remember to do it at all. Often the syndicator ignores reminder emails from their attorney, Once they get their offering documents, thinking, oh, it must be some marketing email. Hey, the documents are drafted. What more do I need from the attorney? All right. What they may be ignoring is a critical reminder that they're about to blow their securities exemption and miss their Blue Sky filing deadlines. This happens far more frequently than it should. You can't blame your attorney for not filing if you don't timely give them the information They need to do the filing. They're not working in your office. They don't know when you accept a new investor. So unless you designate an individual on your team whose job it is to keep your attorney informed, it's likely that the filings just aren't getting done or that they may not be getting done on time. This isn't unusual. It's one of the most consistent compliance gaps we find. What happens if you didn't file? State securities regulators operate independently from the SEC. They can investigate and take action on their own. They don't need the SEC to refer someone to them. Missing Blue Sky filings can be corrected. Most states have procedures for late filings. You file, you pay the fee, often you pay a late fee or penalty, the record shows a late filing, but the gap is addressed. But some states may deny your Rule 506 exemption, and they could make you prove how you followed the rules of their intrastate exemption. And if you can't comply, you may be required to offer a rescission to all of the investors from that state. Other states may fine you based on the amount of your raise or require you to file an affidavit explaining why you filed late, any of which might cause additional legal fees, and filing expenses. What it doesn't undo: if an investor dispute or a regulatory review ever pulls your offering history, missing Blue Sky filings will be in the file. Not necessarily a dispositive finding, but it does establish that your compliance process had gaps. It causes them to scrutinize your offering more closely. How do you find out if your filings were actually done? Ask your attorney directly and specifically, not, did you handle everything on the compliance side? Ask, were Blue Sky notice filings submitted for this offering? Which states? Do you have confirmation documentation for each state? If the answer is, we didn't do it, so we assumed you did it on your own, then query your own team. If no one says they did it, and they would know if they did, you should assume they weren't done and treat this as something to address With a securities attorney and do it immediately. From here on, make sure you delegate someone on your team to be responsible for either keeping your attorney informed so they can do filings for you, or who takes responsibility for filing them for your offering on behalf of your team. Make it your company policy to ensure Blue Sky notice filings get timely filed in every state where investors reside. Make sure your internal policy includes getting filing confirmation for each state. That puts the responsibility clearly in writing, and you'll know it's being done because you'll receive the confirmations. If you want a single reference that covers your required filings, federal and state, in one place, Chapter 10 of my book, How to Raise Capital for Real Estate Legally, right there on the shelf, uh, walks you through this. There's also a printable comparison table of federal versus state exemptions in the back. The link is down below in the description. If you've done Reg D offerings and you're not sure whether Blue Sky filings were submitted, or if you've never heard of Blue Sky filings until right now, you can engage us to review your offering history, identify which states need attention, and explain what the correction process looks like. This is a case of better late than never. Schedule a consultation and we'll tell you how we can help. The link is in the description, syndicationattorneys.com/schedule. 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