Earlier this month, the Division of Corporate Finance (“CorpFin”) of the U.S. Securities and Exchange Commission supplemented — for the second time — its Compliance and Disclosure Interpretations (“C&DIs”) to address some of the questions raised by private fund managers (and others) regarding the “bad actor” disqualification provisions of Rule 506(d).
New Rule 506(d), which became effective on Sept. 23, 2013, disqualifies issuers that have committed or experienced (or who have a relationship with certain categories of persons who have committed or experienced) one or more of an enumerated list of bad acts and actions from relying on the exemption from registration under the Securities Act of 1933 provided by Rule 506 of Regulation D. However, the final text of the rule and the adopting release raised a number of questions on how certain provisions of the bad actor rule would be interpreted in the context of private funds.
Click here for more details of the new SEC staff guidance, specific C&DI guidance on Rule 506(e), and certain implications of the beneficial owner guidance.