What is the “Bad Actor” Ruling?
On July 10, 2013, the Securities and Exchange Commission adopted bad actor disqualification provisions for Rule 506 of Regulation D under the Securities Act of 1933. The disqualification and related disclosure provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D (Click Here to read more).
Essentially the ruling reads that if you are raising capital under a certain specifications then you can be disqualified from raising capital if anyone associated with your raise has a disqualifying event.
Under the final rule, disqualifying events include:
- Certain criminal convictions
- Certain court injunctions and restraining orders
- Final orders of certain state and federal regulators
- Certain SEC disciplinary orders
- Certain SEC cease-and-desist orders
- SEC stop orders and orders suspending the Regulation A exemption
- Suspension or expulsion from membership in a self-regulatory organization (SRO), such as FINRA, or from association with an SRO member
- U.S. Postal Service false representation orders