Blue Sky Bond
What is a blue sky bond?
A blue sky bond is a license and permit bond that securities dealers must purchase to ensure they follow their state’s blue sky laws, which protect consumers (often investors) against fraud. The surety bond guarantees that securities investors (of stocks, bonds, etc.) can safely and wisely invest.
Only certain states require blue sky bonds as part of the securities dealer licensing process. You will need a separate bond in each state (that requires it) in which you intend to become licensed. Bonds must remain active for as long as you stay in business. Most bonds renew annually, and the premium will be a small percentage of the total bond amount.
How do blue sky bonds work?
If a dealer violates the law that leads to damages or losses, the injured party may file a claim for compensation in the amount lost. After investigation, if the claim is valid, the dealer must pay the claimant in full, up to the total bond amount.
If you find yourself in this position, try to settle the claim out of court to avoid extra fees, a tarnished reputation, and wasted time. If you believe the claim was false, contact your surety company for advice on how to best proceed.
Get Your Blue Sky Bond:
Quick Takeaways
- Blue sky laws are regulations that protect investors from securities fraud (also called investment or stock fraud).
- A blue sky bond is a surety bond that securities dealers must purchase to ensure they follow their state’s blue sky laws, which protect consumers against fraud.
- Your surety bond rate will depend on your credit score, business financials, and other factors.
How do blue sky bonds compare to investment advisor bonds?
An investment advisor bond protects consumers from advisors acting illegally or unethically. If an investment advisor violates a law, the injured party may file a claim to receive compensation. A blue sky bond is similar but not the same as an investment advisor bond. It holds securities dealers accountable and helps prevent fraud in the industry.
What does “blue sky” mean in law?
Blue sky laws are regulations that protect investors from securities fraud (also called investment or stock fraud). They provide investors with the information needed to make wise judgments and investment decisions. Blue sky laws hold securities issuers accountable by requiring registration and detailed disclosure of offerings.
Blue sky laws can vary by state, but their purpose is always to protect individual investors from fraud and “overly speculative investments.” The goal is to deter sellers from preying on less experienced or less knowledgeable investors (Investopedia).
How much does a blue sky bond cost?
Blue sky bond costs vary by state. You will pay an annual premium of a percentage of the bond amount required. Your rate will depend on your credit score, business financials, and other factors. For example, if your state requires a $30,000 bond and you have an excellent credit score, you may only have to pay 1% annually, which is $300.
How to Become a Securities Dealer
If you want to become a securities dealer in your state, follow this general process to become licensed.
- Find out if you’ll be classified explicitly as a “broker” or “dealer.”
- Apply at the U.S. Securities and Exchange Commission (SEC) by filing Form BD so the SEC can grant your registration.
- Join a self-regulating organization (SRO).
- Join the Securities Investor Protection Corporation (SIPC).
- Register in every state in which you wish to conduct business.
- Follow each state’s licensing requirements and comply with all regulations, including posting a blue sky bond if applicable.
Can I get a blue sky bond with bad credit?
While your credit score may play a role in how much your bond will cost, poor credit doesn’t mean you don’t have options. Working with a direct surety provider like ZipBonds will give you access to a larger pool of sureties, so you have a better chance of finding an affordable solution. Contact us to learn more.
Apply for a Blue Sky Bond Today
The experts at ZipBonds can help you obtain the bond you need. To connect with one of our team members, please give us a call at 888-435-4191 or email us at support@zipbonds.com. We’ll walk you through the process for blue sky bonds to help you get bonded in a flash!
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.