12 Urb. St. & Loc. L. Newsl. 1 (1988-1989)

handle is hein.journals/stlolane27 and id is 1 raw text is: 

Section of Urban, State and Local Government Law      Vol. 12, No. 1, Fall 1988




              Recent Federal and State

          Blue Sky Law Developments

Affecting Local Government Securities

                           By Patrick K. Arey

  State and local governments have historically been
able to issue and sell their obligations without reg-
istration under federal or state securities (blue sky)
laws. Recent nationally publicized bond defaults, such
as the Washington Public Power Supply System
(WPPSS),' and other local defaults of revenue bonds,
together with lobbying efforts by the WPPSS Bond-
holders' Committee2 have resulted in significant
changes in state blue sky laws and the registration
requirement. These developments affect sales of mu-
nicipal securities in Florida, New Jersey, Minnesota,
Arizona, Texas, Pennsylvania, and, potentially, New
York, depending upon the type of obligation, the lo-
cation of the issuer, and the market in which the
securities will be sold.
  As a general rule, these developments affect pri-
marily revenue obligations, although general obliga-
tions may be affected in particular instances. Similarly,
some recent developments affect only issuers located
in a particular jurisdiction (or may exempt issuers
within a particular jurisdiction). However, the de-
velopments do not appear to affect transactional ex-
emptions from the securities registration requirement,
such as sales to banks and institutional investors.
  The following is a summary, by state, of recent
and possible new developments.

  A recent amendment to
the Florida Securities and
Investor Protection Act
provides that the registra-
tion exemption for govern-
mental securities will not be
available in the case of rev-
enue bonds where the issuer
has defaulted in payment of

principal or interest at any time after December 3 1,
1975,. unless full disclosure is made regarding each
default.' Florida Blue Sky Rule 3E-400.0034 sets forth
a list of nine specific items required to be disclosed
regarding each default, including the amount, the na-
ture of the default, legal, civil or criminal proceedings
relating to the default, the name of the trustee or any
receiver, and their respective fees and expenses. Un-
der this rule, an issuer may choose not to disclose any
such default provided a statement is included in the
offering document to the effect that the disclosure
requirement exists under state law and the issuer sets
forth its reasons why it does not believe any such
default is material to investors in the current offering.
Defaults requiring disclosure include both direct and
guaranteed obligations of the issuer.
  This requirement does not apply to offerings of
general obligation bonds. One difficulty with this rule,
however, is that issuers of conduit revenue bonds
such as industrial development bonds or private
activity bonds may not be aware of defaults in such
bond issues, particularly where the issue was pri-
vately placed to an institutional investor. Accord-
ingly, under such circumstances, an issuer might limit
any certification or representation regarding the ab-
sence of prior defaults to its actual knowledge of any
                                  such default.

         In this issue
Chairman's Message ................... 2
Supreme Court Watch ................. 3
Washington's Labyrinthine Ways... 5
The Impact of AIDS .................. 9
Section N ew s ........................... 12

New Jersey
  Effective November 1987,
New Jersey amended its
blue sky law to provide that
the registration exemption
for governmental securities
would not be available to
any governmental entity
      (continued on page 14)

Section of Urban, State and Local Government Law

Vol. 12, No. 1, Fall 1988

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