A_Ledbetter_LR.jpgCONTRIBUTED BY
Andrew Ledbetter
andrew.ledbetter@dlapiper.com

As expected per the Dodd-Frank Act, the SEC yesterday proposed to add “bad actor” exclusions to Regulation D Rule 506.  Similar to Regulation D Rule 505, Regulation A, Regulation E and state limited offering exemptions, the amendment would disqualify offerings from the use of Rule 506 if the issuer or certain persons involved in the offering have, during the relevant look-back period, faced criminal, civil or administrative orders involving a variety of securities or other financial services industry matters.  If the proposed rule is adopted, entrepreneurs and investors will need to be even more careful when recruiting executives and directors to join the company.  The company will also want to consider doing additional diligence regarding individuals or companies assisting them with sales of securities, as well potential significant investors.Continue Reading ‘Bad Actors’ May Limit Capital Raising Methods