Paredes, Casey and others argued that many, if not most, investment banks had been parties to enforcement actions brought by the SEC. If banks were subject to the bad actor rule for their past violations, they would be disqualified from arranging private placements under Rule 506 of the Securities Act. That could have chilled capital raising by the small-cap companies that rely on public investments in public equity, or PIPEs, to raise money.

Written by Dan Lonkevich

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