Quick Answer
Blue-sky laws are state-level securities registration requirements that apply alongside FINRA registration. States require the Series 63, 65, or 66 exam and may add rules in areas federal law leaves to them, but never relax federal ones. Federal registration alone never satisfies a state's requirements; professionals must register in every state where they do business.
So far we've focused on federal registration through FINRA. But federal registration alone is not sufficient. Securities professionals must also register at the state level in every state where they conduct business.
What Are Blue-Sky Laws?
- Blue-sky laws are state-level securities regulations
- The name comes from the idea of preventing speculative schemes with "no more basis than so many feet of blue sky"
- Every U.S. state has its own set of securities laws that operate alongside federal regulations
- Each state's legislature enacts its own securities statute, and that state's securities regulator (often called the state securities administrator) enforces it. No single federal law creates blue-sky laws
- Many states follow the Uniform Securities Act, a model law that states can adopt as a template. Each state still decides what to adopt, so the details differ from state to state
- States can add their own requirements in areas federal law leaves to them, such as registering agents and broker-dealers and registering offerings of securities that federal law does not cover, but a state can never relax a federal or FINRA requirement
- Federal law also limits the states. Under the National Securities Markets Improvement Act of 1996 (NSMIA):
- States may not require registration of covered securities, such as exchange-listed stocks and mutual fund shares
- States may not set broker-dealer capital, custody, margin, financial responsibility, recordkeeping, or financial reporting rules that differ from or add to the federal rules
Think of it this way: Federal registration is like getting a driver's license; it proves you know how to drive. But state registration is like getting your car registered in each state where you want to drive it. You need both to legally operate.
State Registration Process
In addition to FINRA registration, representatives must register in each state where they conduct business. State registration typically requires:
- Filing Form U4 through the CRD (Central Registration Depository) system
- Passing any required state-level exams:
| State Exam | Purpose |
|---|---|
| Series 63 | Uniform Securities Agent State Law Exam (state law only) |
| Series 65 | Uniform Investment Adviser Law Exam (qualifies an investment adviser representative) |
| Series 66 | Uniform Combined State Law Exam (combines 63 + 65 content) |
- Paying state registration fees
- Meeting any state-specific continuing education requirements
Exam Tip: Gotchas
The Series 63, 65, and 66 are state-level exams, not FINRA qualification exams. Do not confuse them with FINRA top-off exams like the Series 7.
Federal vs. State Registration
| Feature | FINRA (Self-Regulatory Organization) | State (Blue-Sky) |
|---|---|---|
| Administered by | FINRA | Individual state securities regulators |
| Filing system | CRD | CRD (most states) |
| Required exams | SIE + top-off (e.g., Series 7) | Series 63, 65, or 66 |
| Scope | Nationwide industry qualification | State-by-state business authorization |
| Can add its own rules? | Sets the industry baseline | Yes, for agents, broker-dealer registration, and non-covered offerings; not for covered securities or broker-dealer capital, custody, margin, or recordkeeping |
| Can relax a federal or FINRA standard? | N/A | No |
Exam Tip: Gotchas
- A state can never relax a federal requirement. If you see an answer choice suggesting it can, it is wrong.
- "States can add any requirement they like" is also wrong. States add requirements for agents, broker-dealer registration, and non-covered offerings, but federal law bars them from registering covered securities and from adding to federal broker-dealer capital, custody, margin, and recordkeeping rules.
Key Points
- A representative must be registered in every state where they do business or have clients
- Most states accept CRD filings, making the process more uniform
- The CRD system centralizes registration data for both federal and state regulators
- States retain the authority to deny, suspend, or revoke registration independently of FINRA
Exam Tip: Gotchas
Federal registration with FINRA alone is not sufficient to do business. A representative must also satisfy state registration requirements in every state where they have clients. The exam frequently tests whether candidates understand that both levels of registration are required.
What Should You Check on Exam Day?
- Can you explain what blue-sky laws are and why they exist alongside federal registration?
- Do you know the difference between the Series 63, 65, and 66 exams?
- Can you say where a state may add its own requirements, and where federal law stops it?
- Do you know why federal registration with FINRA alone is not sufficient to do business?
- Can you explain what system centralizes registration filings for both state and federal regulators?