A more thorough explanation:

MERIT REGULATION

Merit regulation is a practice under state blue-sky laws that requires securities offerings to not only have a complete and adequate disclosure but also be substantively fair, just, and equitable.

An example of merit regulation is when a company wants to issue stocks to the public. The state blue-sky laws require the company to provide all necessary information about the stocks, such as the risks involved, financial statements, and management team. Additionally, the state will review the offering to ensure that it is fair and equitable to investors.

Another example is when a company wants to issue bonds. The state will require the company to provide all necessary information about the bonds, such as the interest rate, maturity date, and credit rating. The state will also review the offering to ensure that it is fair and equitable to investors.

Merit regulation is a way to protect investors from fraudulent or unfair securities offerings. By requiring companies to provide complete and adequate disclosure and ensuring that the offering is fair and equitable, investors can make informed decisions about whether to invest in the securities. The examples illustrate how merit regulation works in practice and how it helps to protect investors.