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Simple English definitions for legal terms
blue sky laws
Read a random definition: salvus plegius
A quick definition of blue sky laws:
Blue sky laws are rules that protect people from buying stock in fake companies that don't have anything valuable, like land or gold. These laws say that companies that want to sell stock to the public have to get permission from the government and give information about their money and leaders. The name "blue sky" comes from the idea that some companies are just selling nothing but air.
A more thorough explanation:
Definition: Blue sky laws are laws that protect people from buying stocks in companies that are fraudulent and lack substance. These companies may sell things like swamp land, non-existent gold strikes, or dry oil wells. Blue sky laws require that companies get approval from the state corporations commissioner and/or the Securities and Exchange Commission before selling shares to the public. The company must provide details on financing and management to get this approval. The term "blue sky" comes from the idea of preventing companies that have nothing behind them but "blue sky."
One example of a company that might be stopped by blue sky laws is a company that claims to have found a gold mine, but has no evidence to back up their claim. Another example is a company that sells land that is actually a swamp, but claims it is valuable property. These companies might try to sell shares to the public, but blue sky laws would prevent them from doing so without proper approval.
Blue sky laws are important because they protect people from investing in companies that are not legitimate. Without these laws, people could lose their money by investing in companies that have no real value or assets. By requiring companies to provide details on financing and management, blue sky laws help ensure that companies are legitimate and have something to offer investors.