Blue Sky Laws

A common term that refers to laws passed by various states to protect the public against securities fraud. These laws require sellers of new stock issues or mutual funds to register their offerings and provide financial details on each issue so that investors can base their judgments on relevant data. The term originated when a judge ruled that a stock had as much value as a patch of blue sky. Blue Sky laws were preempted for most public and private offerings by federal law in 1986, but certain remnants remain in force, depending on the state.