Category: Bad Actors

Bad Actors: The SEC may grant a waiver to the bad actor disqualifications under Rules 262, 505 or 506 if, upon a showing of good cause, the SEC determines it is not necessary under the circumstances that the use of Regulation A or Rules 505 or 506 be denied. SEC waivers may be qualified or unconditional and may include specific conditions or limitations…

Jul212015

SEC Issues Guidance On “Voting Power” For Purposes Of Bad Actor Rules

 ABA Journal’s 10th Annual Blawg 100

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The SEC has published clarifying guidance and information on defining “voting equity securities” for purposes of the application of the bad actor rules under Rule 506 of Regulation D of the Securities Act of 1933, as amended (“Securities Act”).  The clarifying language was contained within the SEC’s March 25, 2015 release of the final rules amending and adopting Regulation A+.

Rules 262 and 505 of the Securities Act disqualify the use of offerings under Regulation A and Rule 505 of Regulation D if an issuer, its predecessor, or an affiliate of the issuer is considered a “bad actor” as defined by such rules.  In particular, the rules disqualify the issuer if the specified covered person is subject to certain administrative orders, industry bars, an injunction involving certain securities law violations or certain specified criminal convictions.  “Covered persons” under the rules extends to the issuer, predecessor, affiliate, directors, officers, general partners, 20%

Apr212015

SEC Division of Corporation Finance Issues Guidance On Bad Actor Waivers

ABA Journal’s 10th Annual Blawg 100

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Last month the SEC’s Division of Corporation Finance issued guidance on the granting waivers for the bad actor disqualifications under Regulation A and Rules 505 and 506 of Regulation D. 

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 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. 

On July 31, 2013, I summarized the final rules, which summary can

Dec172013

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

Jul312013

SEC has Finalized Rules Disqualifying Felons and Other “Bad Actors” from Rule 506 Offerings

On July 10, 2013, the same day the SEC has adopted final rules eliminating the prohibition against general solicitation and advertising in Rules 506 and 144A offerings as required by Title II of the JOBS Act, the SEC adopted new rules disqualifying felons and other bad actors from participating in Rule 506 offerings as required by Section 926 of the Dodd-Frank Act.

Background

The Dodd-Frank Act required the SEC to implement rules which disqualify certain Rule 506 offerings based on the individuals involved in the