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Legal Update

SEC Disqualifies “Bad Actors” from Participating in a Rule 506 Offering

17 July 2013
Mayer Brown Legal Update

On July 10, 2013, the US Securities and Exchange Commission adopted two final rules that impact certain offerings exempt from registration under the Securities Act of 1933. Both rule changes are expected to be effective by late September of 2013.

The first rule change eliminates the prohibition against general solicitation and general advertising in certain offerings of securities pursuant to Rule 506 of Regulation D under the Securities Act and in offerings pursuant to Rule 144A under the Securities Act. This change was mandated by Title II of the Jumpstart Our Business Startups Act.

The second rule change prohibits issuers from issuing securities in reliance on Rule 506 of Regulation D under the Securities Act if certain felons or other “bad actors” are participating in the offering. This change was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.


  • Laura D. Richman
    T +1 312 701 7304
  • Michael L. Hermsen
    T +1 312 701 7960

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