This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: SEC to Consider 'Bad Actor' Rule under JOBS Act

NEW YORK ( The Deal) -- The Securities and Exchange Commission has scheduled a July 10 meeting to consider whether to adopt rules to eliminate the prohibition against general solicitation and general advertising in private placements and to disqualify securities offerings involving so-called "bad actors."

The SEC has come under pressure to approve the proposed rule for ending the ban on general solicitation, as the commission is a year beyond a congressionally mandated deadline under the Jumpstart Our Business Startups Act.

As the proposed rule is currently written, however, it is likely to draw a legal challenge from consumer advocates who argue that it could leave smaller investors more vulnerable to fraud.

A way out of the quandary may be for the SEC to first enact the so-called bad actor rule, which would prohibit people who have been convicted of securities fraud from participating in private placements. The commission is required to adopt the bad actor rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Allowing general solicitation of private placements would permit unregistered securities to be marketed on the Internet, television and in other mass media, even though unregistered securities can generally only be sold to accredited investors.

Investor advocates including Barbara Roper of the Consumer Federation of America have called for the SEC to go back to the drawing board and repropose the general solicitation rule to include investor protections. That position is shared by at least one SEC commissioner, Luis Aguilar.

The bad actor disqualification rule was proposed back in 2011 as required by the Dodd-Frank Act of 2010.

The disqualification provisions in the proposed rule would apply to securities issuers, which includes various executives, 10% stakeholders, promoters and other entities involved in the offering or solicitation of prospective purchasers. Legal actions such as criminal convictions, court injunctions, broker-dealer disciplinary orders and other regulatory orders could disqualify those enumerated in the rule from participating in the offerings.

The SEC has not held a public meeting on the bad actor rule since January 2012.

It had been held up by opposition from Republican SEC commissioner Troy Paredes and former Republican commissioner Kathleen Casey. They objected to the rule being applied retroactively, arguing that it could hurt capital raising by the smallest companies.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs