Bad Actor Rule Proposal

The SEC explained that it was adopting the bad actor rule in substantially the form in which it was proposed in May 2011 with certain modifications. The Staff explained that the rule contains modifications to the categories of persons covered; modifications to the types of actions that are covered; and modifications to the actions that are covered. In addressing the modifications to the categories of "covered persons," the Staff explained that, in certain respects, the categories were being narrowed. For example, the Staff noted that, as opposed to covering all officers of the issuer, the rule will cover executive officers and officers involved with the proposed offering. The rule will cover beneficial owners of 20% or more of an issuer's total shares outstanding. The Staff noted that investment managers of funds and the principals of such investment managers will be added as covered persons. The Staff noted that the types of actions covered in the final rule