and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the mechanism of a free and open market
and a national market system, and, in general, to protect investors and the public interest …”
Blue Sky Laws
When the Securities Exchange Act is discussed, blue sky laws are often mentioned. In 1911, Kansas bank
commissioner J.N. Dolley became concerned about what he called “swindles,” in which investors at the time
lost money by investing in “fake mines” or “a Central American plantation that was nine parts imagination.”
Therefore, he lobbied for the first “comprehensive” securities law in the United States because, as he phrased
it, these investments were backed by nothing except the blue skies of Kansas. So, state-level securities laws
aimed to combat fraud are called blue sky laws. The SEC does not have jurisdiction over activities within states
and does not enforce blue sky laws.
Figure 14.5
In addition to the Securities Exchange Act of 1934, blue sky laws provide an additional state-level
layer of legal protection for the public. (Credit: Elia Clerici/ pexels/ License: CC0)
Assessment Questions
1. Explain a laissez-faire economic policy.
2. The following are examples of self-regulatory organizations that the SEC oversees:
a.
The New York Stock Exchange.
b.
The National Association of Securities Dealers.
c.
The Chicago Board of Options.
d.
All of the above.
158
Chapter 14 Securities Regulation
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