The proposed "bad actor" rule will prohibit the use of Rule 506 of Regulation D in connection with any offering which is associated with or promoted by a person which has committed certain "bad acts: (as defined by the rule) by imposing a sort of due diligence requirement on issuers to verify that certain parties have not engaged in prior misconduct. The penalty for violating the rule would be the loss of the issuers' private placement exemptions. The concern, as Alex Davie details, is that this rule could raise costs for startups and private funds.
- Summary by FizzLaw Team
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Angel Capital Association Weighs in on Proposed "Bad Actor" Rule