SEC Guidance on Rules Disqualifying Bad Actors from Participating in Rule 506 Offerings
On December 4, 2013, the SEC updated its Compliance and Disclosure Interpretations (“C&DI’s”) including new guidance on the rules disqualifying bad actors from participating in Rule 506 offerings.
Background
The Dodd-Frank Act required the SEC to implement rules which disqualify certain Rule 506 offerings based on the individuals involved in the Issuer and related parties. On July 10, 2013, the SEC adopted such rules by amending portions of Rules 501 and 506 of Regulation D, promulgated under the Securities Act of 1933. The new rules went into effect on September 23, 2013. The new rule disqualifies the use of Rule 506 as a result of certain convictions, cease and desist orders, suspensions and bars (“disqualifying events”) that occur on or after September 23, 2013, and adds disclosure obligation in Rule 506(e) for disqualifying events that occurred prior to September 23, 2013.
Rule 506 provides that disqualifying events committed by a list of specified “covered persons” affiliated with the Issuer or
Proposed Crowdfunding Rules – Part III
As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules. The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website. In a series of blogs, I am summarizing the lengthy rule release. This Part III in my series continues a discussion of the in-depth disclosure requirements for Issuers for use in their offering statements. Part IV will discuss financial disclosure obligations.
Summary Breakdown of Proposed New Rules – Requirements on Issuers
Disclosure Requirements
Pursuant to the CROWDFUND Act as set forth in the JOBS Act, an Issuer who offers or sells securities in a crowdfunding offering must file with the SEC and provide investors and the funding intermediary (whether a funding portal or broker-dealer) and make available to potential investors:
(a) The name, legal status, physical address, and website address of the Issuer (discussed in Part II of
Proposed Crowdfunding Rules – Part II
As required by Title III of the JOBS Act, on October 23, 2013, the SEC has published proposed crowdfunding rules. The SEC has dubbed the new rules “Regulation Crowdfunding.” The entire text of the rule release is available on the SEC website.
Background
Crowdfunding generally is where an entity or individual raises funds by seeking small contributions from a large number of people. The crowdfunder sets a goal amount to be raised from the crowd with the funds to be used for a specific business purpose. In addition, a crowdfunding campaign allows the crowd to communicate with each other, thus adding the benefit of the “wisdom of the crowd.” Small businesses can particularly benefit from crowdfunding as they are not limited by
