Donald Trump & Rule 506(d) bad actor

Lauren LeibowitzPrincipal at 1st BridgeHouse Securities, LLC, CrowdfundBeat Sr. Guest editor,

On July 10, 2013, the Securities and Exchange Commission adopted bad actor disqualification provisions for Rule 506 of Regulation D under the Securities Act of 1933, to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The disqualification and related disclosure provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D.

donald-trump-apprentice

 

 

 

 

 

As a result of Rule 506(d) bad actor disqualification, an offering is disqualified from relying on Rule 506(b) and 506(c) of Regulation D if the issuer or any other person covered by Rule 506(d) has a relevant criminal conviction, regulatory or court order or other disqualifying event that occurred on or after September 23, 2013, the effective date of the rule amendments. Under Rule 506(e), for disqualifying events that occurred before September 23, 2013, issuers may still rely on Rule 506, but will have to comply with the disclosure provisions of Rule 506(e). Since Donald Trump is a serial entrepreneur he should be aware whether any of his past or current convictions, regulatory and order events will define him as a bad actor or trigger a mandatory disclosure.

COVERED PERSONS

The rule covers the issuer, including its predecessors and affiliated issuers, as well as:

Directors and certain officers, general partners, and managing members of the issuer.
20 percent beneficial owners of the issuer.
Promoters.
Investment managers and principals of pooled investment funds.
Persons compensated for soliciting investors as well as the general partners, directors, officers, and managing members of any compensated solicitor.
DISQUALIFYING EVENTS

Under the final rule, a “disqualifying event” includes:

Criminal convictions in connection with the purchase or sale of a security, making of a false filing with the SEC or arising out of the conduct of certain types of financial intermediaries. The criminal conviction must have occurred within 10 years of the proposed sale of securities (or five years in the case of the issuer and its predecessors and affiliated issuers).
Court injunctions and restraining orders in connection with the purchase or sale of a security, making of a false filing with the SEC, or arising out of the conduct of certain types of financial intermediaries. The injunction or restraining order must have occurred within five years of the proposed sale of securities.
Final orders from the Commodity Futures Trading Commission, federal banking agencies, the National Credit Union Administration, or state regulators of securities, insurance, banking, savings associations, or credit unions that …
Bar the issuer from associating with a regulated entity, engaging in the business of securities, insurance or banking, or engaging in savings association or credit union activities, or… Are based on fraudulent, manipulative, or deceptive conduct and are issued within 10 years of the proposed sale of securities.

Certain SEC disciplinary orders relating to brokers, dealers, municipal securities dealers, investment companies, and investment advisers and their associated persons.
SEC cease-and-desist orders related to violations of certain anti-fraud provisions and registration requirements of the federal securities laws.

SEC stop orders and orders suspending the Regulation A exemption issued within five years of the proposed sale of securities.
Suspension or expulsion from membership in a self-regulatory organization (SRO) or from association with an SRO member.
U.S. Postal Service false representation orders issued within five years before the proposed sale of securities.

DISCLOSURE OF PRE-EXISTING DISQUALIFYING EVENTS

Disqualification applies only for disqualifying events that occur after September 23, 2013 But matters that existed before September 23, 2013 and would otherwise be disqualifying are subject to a mandatory disclosure requirement to investors. It’s always recommended that questions regarding disclosure requirements should be discussed with a Securities Attorney.

THE VERDICT

Donald Trump has been involved in as many as 169 federal lawsuits since 1983. The bad actor disqualifying events are mostly focused with securities related issues therefor not all convictions, regulatory and order events result in a disqualification.

In January 2002, Trump Hotels and Casino Resorts (“THCR”) was issued a cease and desist order from the SEC. The SEC found that in October 1999 Trump Hotels, through the conduct of its CEO (Trump), its CFO, and its treasurer, violated antifraud provisions Section 10(b) of the Exchange Act and Rule 10b-5 thereunder by knowingly or recklessly issuing a materially misleading press release. The company, which consented to the issuance of the SECs order without admitting or denying the findings, was ordered to stop doing such things. Says one SEC official: “This case demonstrates the risks involved in mishandling pro forma reporting.”

As of now, Donald Trump is not disqualified as a bad actor since the disqualifying event occurred before September 23, 2013. If Donald Trump is ever a covered person of an Issuer raising capital through a Regulation D 506(b) or a 506(c) exemption, then the Issuer will most likely be required to include a disclosure in its offering materials.

 

Tags: , , , , , , ,

nov2017-fintech confernce-dc

HEADLINE NEWS

Entrepreneur5 Ways to Learn the Nuts and Bolts of CrowdfundingEntrepreneurCrowdfunding is a multibillion dollar worldwide industry that continues to disrupt the traditional world of corporate finance, as well as change the way products go to market. Businesses new and old, small and l [...]

Forbes6th Annual Global Crowdfunding Convention Sponsored By ForbesBooksForbesIn 2012, crowdfunding raised $1.7 billion in capital – but last year, total capital raised using crowdfunding reached over $60 billion. This represents a seismic shift in the way that startups, non-profits, [...]

Boing BoingCrowdfunding a major new critical study of Robert A HeinleinBoing BoingIt's a huge book -- as befits an author with such a massive oeuvre -- and would have cost a fortune for a traditional academic press to publish, so she's crowdfunding the book on Unbound. Ebook [...]

Advocate.comGay Republican Obamacare Critic Turns to Crowdfunding After ...Advocate.com"Sassy Gay Republican" Alex Newman eventually found out workers' comp would cover his medical costs, but he continued crowdfunding to replace his car.and more » [...]

The ColumbianCrowdfunding raises $12000 to help Vancouver Safeway workerThe ColumbianCrowdfunding raises $12,000 to help Vancouver Safeway worker. Wayne Hudson was diagnosed with a life-threatening infection and will be hospitalized for at least three months. Popular Cascade Park Safe [...]

Forbes5 Crowdfunded Side Projects That Became Million-dollar CompaniesForbesCrowdfunding has also given many side projects a fighting chance, when no one else would. Many startups that originally launched on crowdfunding platforms have gone on to build $100 million businesses from the [...]

Indiatimes.comThrough Crowdfunding, Irish Farmer Saves 7 Cows From Slaughter & Sends Them To Sanctuary In UKIndiatimes.comThrough Crowdfunding, Irish Farmer Saves 7 Cows From Slaughter & Sends Them To Sanctuary In UK. KC Archana. September 24, 2017. An Irish farmer has decided [...]

Will Crowdfunding Become a Big Deal in India?Knowledge@WhartonCrowdfunding — the practice of raising small amounts of capital from a large number of people to fund new ventures — is finally gaining traction in India. The question is: Will it deliver like it has in other markets? India [...]

PCGamesNImmersive sim sequel Consortium: The Tower hits Early Access after crowdfunding successPCGamesNA massive sci-fi tower, a terrorist incident and a dramatic rooftop insertion all while the clock ticks down. It's like a sci-fi Die Hard, but very few games give equal weight t [...]

Fast CompanyHow Crowdfunding Site Patreon Is Helping Artists Build Media EmpiresFast Company(Yam, who built the original version of the site from scratch in three months, is CTO.) Like other crowdfunding platforms, it allows creators to solicit money from their audiences and share upd [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

CrowdFund Beat Media

2020fintech.com “The Future of #Blockchain Digital Currency” #bitcoin “Game Changer” 2017 Fintech World Workshop Series twitter.com/BTCTN/status/9…

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |