How To Get A “Bad Actor” Waiver From the SEC

The Securities and Exchange Commission recently published a policy statement that describes its “bad actor” waiver process. As you recall, if there is a bad actor involved in your deal, you may not use certain exemptions from registration, including Rule 506 of Regulation D.

It will consider the following factors, including:

  • who was responsible for the misconduct;
  • what was the duration of the misconduct;
  • what remedial steps have been taken; and
  • the impact on the issuer or third parties (investors, clients) if the waiver is denied.

No single factor is dispositive, and the burden is on the waiver applicant to show good cause that it is not necessary under the circumstances that the exemptions be denied. Where there is a criminal conviction or a scienter based violation involving the offer and sale of securities, the burden on the party seeking the waiver to show good cause that a waiver is justified would be significantly greater.

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at: http://www.linkedin.com/pub/jeffrey-a-koeppel/0/63/5a9
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