Friday, August 30, 2013
Scope of New Rule
Rule 506 of Regulation D
The Bad Actor disqualification provisions in Rule 506 apply to the following “covered persons”:
• the issuer and its predecessors;
• any affiliated issuer;
• any director, executive officer, other officer participating in a Rule 506 offering, or the issuer’s general partner, or managing member;
• any promoter as defined in Rule 405 of the Securities Act connected with the issuer in any capacity at the time of the sale of securities in a Rule 506 offering;
• any beneficial owner of 20 percent or more of any class of the issuer’s outstanding voting equity securities;
• any investment manager of an issuer that is a pooled investment fund;
• any person who has been or will be paid directly or indirectly compensation in any form for soliciting investors in connection with the Rule 506 offering;
• any general partner or managing member of any such investment manager participating in the Rule 506 offering; or
• any director, executive officer or other officer participating in the Rule 506 offering of any such investment manager or compensated person or general partner or managing member of such investment manager or person compensated for soliciting investors.
Disqualifying Events For Covered Persons in Rule 506 Offerings
Rule 506 identifies bad actors as persons or entities that are the subject of:
• Criminal convictions;
• Court injunctions and restraining orders;
• U.S. Postal Service false representation orders.
Disclosure Of Disqualification Events Prior to Effectiveness of Rule
For more information please visit: Securities Lawyer 101
Rule 506(c) requires that issuers take reasonable steps to verify that Rule 506(c) investors are accredited. The SEC has indicated that accredited investor status will be an objective determination by the issuer based upon the particular facts and circumstances. The SEC suggested the methods below.
The issuer should review tax forms, including W-2s, 1099s, K-1s, and 1040s, that report the purchaser’s income for the two most recent years. The issuer should also obtain written representations from the investor that he or she has a reasonable expectation of reaching the income level necessary to qualify as an accredited investor during the current year.
The issuer should review bank, brokerage and other statements of securities holdings, certificates of deposit, tax assessments and appraisal reports that are no more than 3 months old.
The issuer should request written confirmations from third parties such as broker-dealers, investment advisers, attorneys and certified public accountants, that such third party has taken reasonable steps within the prior three months to verify that the purchaser is an accredited investor.
The issuer should ensure that accredited Investors who purchased prior to September 23 should certify that he or she remains an accredited investor.
Thursday, August 29, 2013
Public companies with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act ), are subject to the periodic and current reporting requirements of Section 13 or 15(d) of Continue readinghttp://www.securitieslawyer101.com/10-k/
In recent years, numerous issuers have misused aged debt to issue unrestricted securities by obtaining a legal opinion from a corrupt or incompetent securities attorney. A recent decision makes clear that issuers cannot use aged debt as a basis for the Continue readinghttp://www.securitieslawyer101.com/aged-debt/
Wednesday, August 28, 2013
On August 15, 2013, the SEC obtained a summary judgment against Jonathan C. Gilchrist for violation of the antifraud and registration provisions of the federal securities laws. On August 16, 2013, the court entered a final judgment imposing monetary and other Continue readinghttp://www.securitieslawyer101.com/504/
On August 27, 2013, the Securities and Exchange Commission (the SEC ) filed a securities fraud enforcment action against an Oklahoma wedding singer and former investment adviser, Larry J. Dearman, Sr. and his special friend, Marya Gray, in connection with fraudulent securities offerings that Continue readinghttp://www.securitieslawyer101.com/wedding/