What Is the “Bad Actor” Disqualification Rule under Regulation D?

The "bad actor" disqualification rule under Regulation D prohibits issuers from relying on the Rule 506 exemptions if the issuer or certain other "covered persons" (such as directors, officers, or promoters) have experienced a "disqualifying event." These events include criminal convictions, court injunctions, or certain regulatory orders related to securities fraud or financial misconduct within a specified timeframe. The rule is designed to protect investors by keeping individuals with a history of financial malfeasance out of private securities offerings.