SEC Gets Tough On Bad Actors

New Securities and Exchange Commission (SEC) Rule 506(d), which is set to take effect September 23, 2013, disqualifies securities offerings from reliance on the private placement exemption of Rule 506 of the Securities Act of 1933, as amended (the Securities Act), if certain felons and other "bad actors" are involved in the offering.

The rule was mandated by Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and applies to both traditional Rule 506(b) private placements (sales to accredited investors and to up to 35 non-accredited investors without any general solicitation) and to new Rule 506(c) private placements (sales to accredited investors only, but using general solicitation).