Disqualification of Felons and Other "Bad Actors" from Rule 506 Offerings and Related Disclosure Requirements

Rule 506 of Regulation D of the Securities Act of 1933 is one of the most commonly used registration exemptions to raise investments for a private placement.In July 2013, the SEC adopted a new provision for Rule 506, known as the "bad actor disqualification provision." The disqualification and related disclosure provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D.As a result of Rule 506(d) an offering is disqualified from relying on Rule 506(b) and 506(c) of Regulation D if the issuer or any other person covered by Rule 506(d) has a relevant criminal conviction, regulatory or court order or other disqualifying event that occurred on or after September 23, 2013. Under Rule 506(e), for disqualifying events that occurred before September 23, 2013, issuers may still rely on Rule 506, but will have to comply with the disclosure provisions of Rule 506(e) discussed in part 6 of this guide.Fortunately, Rule 506(d) does not apply to everyone associated…

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