Rule 506(d) Bad Actor Disqualification Questionnaire

Summary

This template questionnaire may be used to determine whether a person has been the subject of a disqualifying event under the "bad actor" disqualification provisions of Rule 506(d) (17 C.F.R. § 230.506) of Regulation D under the Securities Act of 1933 (Securities Act). This template includes practical guidance and drafting notes. Securities offerings relying on the safe harbor exemptions from registration provided by Rule 504 (17 C.F.R. § 230.504), Rule 506(b), or Rule 506(c) of Regulation D are subject to the "bad actor" disqualifications of Rule 506(d). Rule 506(d) prohibits an issuer from relying on Rule 506 if an issuer or certain persons associated with the issuer or the offering (covered persons) have been the subject of a disqualifying event. Rule 504(b)(3) provides that the "bad actor" disqualification provisions of Rule 506(d) apply to Rule 504 offerings. Note, Regulation A (17 C.F.R. §§ 230.251 et seq.) and Regulation Crowdfunding (17 C.F.R. §§ 227.100 et seq.) also have similar bad actor disqualification provisions. Under Rule 506(d)(1), covered persons include: • The issuer, including its predecessors and affiliated issuers • Directors, general partners, and managing members of the issuer • Executive officers of the issuer and other officers of the issuer that participate in the offering • 20% beneficial owners of the issuer, calculated on the basis of total voting power • Promoters connected to the issuer at the time of sale • For pooled investment fund issuers, the fund's general partner and investment manager • Persons compensated for soliciting investors, including their general partners, and managing members • Directors, executive officers or other officers participating in the offering of any such investment manager or solicitor or general partner or managing member of such investment manager or solicitor This questionnaire should be sent by the issuer or its counsel to all covered persons early in the offering process. However, because Rule 506(d) covers events up to the time of sale of the securities, you should ensure that respondents notify the issuer of any changes. For information regarding Rule 506 and Regulation D, including the enhanced due diligence required to avoid violating the "bad actor" disqualification of Rule 506(d), see Regulation D Offerings. For a full listing of key content covering Regulation D offerings, see Regulation D Resource Kit. For template representations, warranties and covenants to be used in a placement agency or similar agreement for a securities offering, see Rule 506(d) Bad Actor Representations, Warranties, and Covenants. For more information on private placements, see Private Placements Resource Kit.