What are state blue sky laws designed to protect investors from?

State blue sky laws are designed specifically to protect investors from purchasing risky securities without proper information. These laws require that companies offering securities to the public provide full disclosure of significant information regarding the investment, including potential risks, financial statements, and any relevant details that might affect an investor's decision. The term "blue sky" refers to the idea of securities having no hidden risks, with the laws ensuring that investors can make informed decisions based on transparent and truthful information. As a result, investors are less likely to be misled or defrauded by promoters of dubious or speculative investments.

These laws play an essential role in maintaining market integrity and promoting fair dealing by establishing requirements for registration and disclosure, thereby fostering a more stable investment environment for individuals.