Can I be disqualified from using private placements under Regulation D?

New Rule 506(d), enacted under the Dodd-Frank Act, disqualifies an issuer from relying on the Rule 506 exemption under Regulation D if the issuer or any other person covered by the rule had a “disqualifying event.”

An issuer can be disqualified from private placements under Rule 506 by certain bad acts committed by:

  • The issuer
  • Directors and certain officers, general partners, and managers of the issuer
  • 20 percent beneficial owners of the issuer
  • Promoters
  • Investment managers and principals of pooled investment funds
  • Persons compensated for soliciting investors, which would include finders

Disqualifying events include but are not limited to:

  • Certain criminal convictions
  • Certain court injunctions and restraining orders
  • Certain SEC disciplinary orders
  • Certain SEC cease-and-desist orders
  • Suspension or expulsion from self-regulatory organizations like FINRA
  • The disqualifying event must have occurred before September 23, 2013.  However, disqualifying events that occurred before September 23, 2013 must be disclosed in writing to investors before the sale of securities is made.


Posted in: Uncategorized.
Last Modified: April 28, 2016