{"id":1782714,"date":"2022-10-14T11:11:05","date_gmt":"2022-10-14T16:11:05","guid":{"rendered":"https:\/\/crowdfundingattorney.com\/?p=2791"},"modified":"2022-10-14T11:11:05","modified_gmt":"2022-10-14T16:11:05","slug":"the-crowdfunding-bad-actor-rules-dont-apply-to-investors","status":"publish","type":"station","link":"https:\/\/platodata.io\/plato-data\/the-crowdfunding-bad-actor-rules-dont-apply-to-investors\/","title":{"rendered":"The Crowdfunding Bad Actor Rules Don\u2019t Apply To Investors"},"content":{"rendered":"<div><img decoding=\"async\" src=\"https:\/\/wordpress-1016567-4521551.cloudwaysapps.com\/wp-content\/uploads\/2022\/12\/the-crowdfunding-bad-actor-rules-dont-apply-to-investors.png\" class=\"ff-og-image-inserted\"><\/div>\n<p>I often see Subscription Agreements asking the investor to promise she\u2019s not a \u201cbad actor.\u201d This is unnecessary. The term \u201cbad actor\u201d comes from three sets of nearly indistinguishable rules:<\/p>\n<ul>\n<li>17 CFR \u00a7230.506(d), which applies to Rule 506 offerings;<\/li>\n<li>17 CFR \u00a7230.262, which applies to Regulation A offerings; and<\/li>\n<li>17 CFR \u00a7227.503, which applies to Reg CF offerings.<\/li>\n<\/ul>\n<p>In each case, the regulation provides that the issuer can\u2019t use the exemption in question (Rule 506, Regulation A, or Reg CF) if the issuer or certain people affiliated with the issuer have violated certain laws.<\/p>\n<p>Before going further, I note that these aren\u2019t just any laws \u2013 they are laws about financial wrongdoing, mostly in the area of securities. Kidnappers are welcome to use Rule 506, for example, while ax murderers may find Regulation A especially useful even while still in prison.<\/p>\n<p>Anyway. <\/p>\n<p>Reg CF\u2019s Rule 503 lists everyone whose bad acts we care about:<\/p>\n<ul>\n<li>The issuer;<\/li>\n<li>Any predecessor of the issuer;<\/li>\n<li>Any affiliated issuer;<\/li>\n<li>Any director, officer, general partner or managing member of the issuer;<\/li>\n<li>Any beneficial owner of 20 percent or more of the issuer\u2019s outstanding voting equity securities, calculated on the basis of voting power;<\/li>\n<li>Any promoter connected with the issuer in any capacity at the time of filing, any offer after filing, or such sale;<\/li>\n<li>Any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities; and<\/li>\n<li>Any general partner, director, officer or managing member of any such solicitor.<\/li>\n<\/ul>\n<p>Nowhere on that list do you see \u201cinvestor.\u201d The closest we come is \u201cAny beneficial owner of 20 percent or more of the issuer\u2019s outstanding voting equity securities,\u201d but even there the calculation is based on voting power. In a Crowdfunding offering you wouldn\u2019t give an investor 20% of the voting power, for reasons having nothing to do with the bad actor rules.&nbsp;<\/p>\n<p>So it just doesn\u2019t matter. This is one more thing we can pull out of Subscription Agreements.&nbsp;<\/p>\n<p>I know some people will say \u201cBut we want to know anyway.\u201d To me this is unconvincing. If you don\u2019t ask about kidnapping you don\u2019t need to ask about securities violations.<\/p>\n<p><strong>Questions?&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/www.lexnovalaw.com\/our-attorneys\/markley-s-roderick\/\" target=\"_blank\">Let me know.<\/a><\/strong><\/p>\n<ul class=\"plato-post-bottom-links\">\n<li class=\"plato-post-bottom-link-amplifi\">SEO Powered Content &amp; PR Distribution. <a href=\"https:\/\/www.amplifipr.com\" target=\"_blank\" rel=\"noopener\">Get Amplified Today.<\/a><\/li>\n<li class=\"plato-post-bottom-link-platoblockchain\">Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. <a href=\"https:\/\/platoblockchain.com\" target=\"_blank\" rel=\"noopener\">Access Here.<\/a><\/li>\n<li class=\"plato-post-bottom-link-source\"><span>Source:<\/span> <a href=\"https:\/\/crowdfundingattorney.com\/2022\/10\/14\/the-crowdfunding-bad-actor-rules-dont-apply-to-investors\/\" target=\"_blank\" rel=\"noopener\">https:\/\/crowdfundingattorney.com\/2022\/10\/14\/the-crowdfunding-bad-actor-rules-dont-apply-to-investors\/<\/a><\/li>\n<\/ul>\n","protected":false},"author":1,"featured_media":1782715,"template":"Default","meta":{"_eb_attr":"","type":"","auto_type":false,"post":"","stream":"","stream_url":"","waveform_data":[],"duration":0,"start":0,"end":0,"bpm":0,"downloadable":false,"download_url":"","purchase_title":"","purchase_url":"","post-count-all":0,"like_count":0,"download_count":0,"editor_note":"","copyright":"","captions":[],"sources":[]},"genre":[10645],"station_tag":[13775,9160,40484,39888,39830,5255,12974,4521,23439,30993,9610,14391,13660,5718,4868,14043,12200,11364,11005,8299,5009,11467,4816,9164,22089,14017,4402,9165,39858,9706,9166,15572,3900,30994,13776,11103,4072,34012,9167,9418,3650,19265,11939,3699,3700,25210,3653,13648,4198,3911,4087,10384,9246,11292,10997,39997,39917,3855,4280,4206,3707,17454,39986,4900,10279,4541,3966,11944,11471,7457,8453,9642,3918,41316,5928,12393,9057,9248,4480,41924,3865,10663,40072,4116,4458,4024,24463,9996,11458,13751,4414,39843,13215,15338,13778,13569,3671,19267,10367,38738,4367,10685,36520,11454,27168,14555],"artist":[13860],"mood":[],"activity":[],"_links":{"self":[{"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/station\/1782714"}],"collection":[{"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/station"}],"about":[{"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/types\/station"}],"author":[{"embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/users\/1"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/media\/1782715"}],"wp:attachment":[{"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/media?parent=1782714"}],"wp:term":[{"taxonomy":"genre","embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/genre?post=1782714"},{"taxonomy":"station_tag","embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/station_tag?post=1782714"},{"taxonomy":"artist","embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/artist?post=1782714"},{"taxonomy":"mood","embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/mood?post=1782714"},{"taxonomy":"activity","embeddable":true,"href":"https:\/\/platodata.io\/wp-json\/wp\/v2\/activity?post=1782714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}