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http://www.TheSecuritiesAttorneys.com Reg A Have You Been a Bad Boy?
The SEC amended the “bad actor” provisions of Regulation A to be in line with Rule 506 of Regulation D. You cannot use Reg A if the issuer or other “covered persons” have been convicted of, or are subject to court or administrative sanctions, for fraud or other violations.
Disqualifying events: 1. Criminal convictions 2. Court injunctions and restraining orders 3. Final orders of certain regulators 4. SEC disciplinary orders 5. Certain SEC cease-and-desist orders 6. Suspension or expulsion from SRO membership or association with an SRO member (SRO = Self-Regulatory Organization such as the stock exchanges and FINRA) 7. Stop orders and orders suspending the Regulation A exemption 8. U.S. Postal Service false representation orders
An issuer would not lose the Regulation A exemption if it can show that it did not know, and in the exercise of reasonable care could not have known, of the existence of a disqualification.
The covered persons include managing members of limited liability companies; compensated solicitors of investors; underwriters; executive officers and other officers participating in the offering; and beneficial owners of 20% or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power.
Consistent with the bad actor disqualification rules under Rule 506(d), the final rules also include two new disqualification triggers not previously present in Regulation A:
(1) final orders and bars of certain state and other federal regulators, and (2) SEC cease-and-desist orders relating to violations of scienter-based anti-fraud provisions of the federal securities laws or Section 5 of the Securities Act.
The order must bar the covered person at the time of filing of the offering statement.
Disqualified issuers can request a waiver of the disqualification from the SEC.
Want to know more? – email me at John.Lux@ Securities-Law.info (240) 200-4529
John E. Lux was in the top 5% of authors on Slideshare in 2014 and has been quoted by Bloomberg as an expert on reverse mergers
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