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Blue Sky Law That Effectively Quash Securities Offering Do Not Violate Commerce Clause
Description Appeals court upheld constitutionality of New Jersey securities regulation that effectively killed an initial public offering that was exempt from federal registration requirements. Court held that the state had a valid interest in protecting securities buyers of suspect securities coming from the state.
Topic Securities Law
Key Words Blue Sky Laws, Commerce Clause
C A S E   S U M M A R Y
Facts Goldman, a New Jersey underwriter, planned the initial public offering of stock in Imatec, which would be traded as a NASDAQ Small Cap stock and, as such, be exempt from initial federal registration requirements. Since the stock was still subject to regulation in various states, Goldman files a prospectus with the New Jersey Bureau of Securities, which indicated that it would not approve the offering, although other states had. Goldman filed a declaratory judgment action in federal court against the Bureau, contending that the state's regulation of the security was a violation of the Commerce Clause. The district court agreed with Goldman; the Bureau appealed.
Decision Reversed. The New Jersey Securities Act did not violate the commerce clause when it authorized the Bureau to prevent New Jersey underwriters from selling securities from New Jersey to buyers in other states that had authorized purchase of the securities. The law furthers the interest the state has in protecting out-of-state buyers from New Jersey companies offering suspect securities.
Citation A.S. Goldman & Co. v. New Jersey Bureau of Securities, 163 F.3d 780 (3rd Cir., 1999)

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