TOPEKA, KANSAS - - It was exactly one hundred years ago today that the Kansas legislature enacted legislation known as the “Blue Sky Law” to protect Kansas investors from securities fraud. At that time, the citizens of the State of Kansas were experiencing a time of financial prosperity and investment opportunities began abounding for those with a little extra cash.
But numerous requests for advice about certain “glittering” investments, moved the State Banking Commissioner, J. N. Dolley, to believe that many Kansans were being taken advantage of and that many of the securities being offered were “doubtful or worthless”. He took his concerns to the legislature, encouraging them to take action to protect Kansas citizens and businesses. (Topeka Journal, June 9, 1910)
Shortly thereafter, lawmakers enacted a law to prevent the sale of “securities” which had nothing behind them other than the “blue sky”. The law required those involved in the sale of securities to submit certain information about their business to the state, and to also receive permission from the state before selling securities to Kansans. In the next few years, other states passed similar laws. Following the great Stock Market Crash of 1929, the federal government began to regulate investment activity with the passage of the Securities Act of 1933 and the creation of the U.S. Securities and Exchange in 1934.
Kansas Securities Commissioner, Aaron Jack, says that although the “Blue Sky Law” is not in effect today, it served as the foundation for all modern securities laws, and that the principles it established for the purchase and sale of securities are the same principles upheld and enforced by securities regulators across the nation. “The leadership our legislature demonstrated by originating and enacting the “Blue Sky Law” not only benefited Kansas, but the entire nation, as well. That is something we can be proud of.”