The short answer: an offering cannot rely on Rule 506(b) or 506(c) if the issuer or another covered person has a relevant disqualifying event—such as a criminal conviction or a regulatory or court order—that occurred on or after September 23, 2013. Events before that date do not block reliance on Rule 506, but they trigger disclosure obligations under Rule 506(e).
The Securities and Exchange Commission adopted these bad actor disqualification provisions on July 10, 2013, to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provisions appear as paragraphs (d) and (e) of Rule 506 of Regulation D. The Commission describes the guidance as an outline to help issuers understand and comply with the disqualification and disclosure provisions.
Two dates, two outcomes
The most useful distinction for anyone drafting or reading an offering announcement is the date of the disqualifying event, not the date of the offering.
- On or after September 23, 2013: the offering is disqualified from relying on Rule 506(b) and 506(c) if the issuer or any other covered person has a relevant criminal conviction, regulatory or court order, or other disqualifying event.
- Before September 23, 2013: issuers may still rely on Rule 506, but must comply with the disclosure provisions of Rule 506(e).
September 23, 2013 is the effective date of the rule amendments. That single date separates a bar on the exemption from a disclosure requirement.
Who is a covered person
Identifying covered persons matters because issuers are required to conduct a factual inquiry into whether any covered person has had a disqualifying event. The existence of such an event will either disqualify the offering from reliance on Rule 506 or require disclosure to investors.
| Category | Who is included |
|---|---|
| Issuer and affiliates | The issuer, its predecessors, and affiliated issuers—entities in control of, controlled by, or under common control with the issuer that are issuing securities in the same offering, including offerings subject to integration under Rule 502(a) |
| Directors, general partners, managing members | Board members for corporations, general partners for partnerships, managing members for limited liability companies |
| Officers | Executive officers, and other officers of the issuer that participate in the offering |
| Large beneficial owners | 20 percent beneficial owners of the issuer, calculated on the basis of total voting power |
| Pooled investment funds | The fund's investment manager and its principals |
| Solicitors | Persons compensated for soliciting investors, including their directors, general partners and managing members |
Each row is a distinct screening task. The issuer and affiliate row is broader than the issuing entity alone because it reaches predecessors and affiliated issuers in the same offering. The officer row turns on participation in the offering, not title alone. The beneficial owner row uses total voting power as the measuring stick. For pooled investment fund issuers, the manager and its principals are covered even though they sit outside the fund entity.
How this reads into an announcement or template
For editors and research assistants, the practical value is in structure rather than adjectives. A factual statement about a Rule 506 offering can be organized around three fields: the covered-person categories screened, the date of any identified event relative to September 23, 2013, and whether the result is disqualification from Rule 506(b) and 506(c) or disclosure under Rule 506(e).
This is an illustration of structure only. Suppose, hypothetically, an issuer identifies a covered person with an event dated after the cutoff. The template would record the category, the date, and the conclusion that the offering is disqualified from relying on Rule 506(b) and 506(c). If the event predates the cutoff, the template records the category, the date, and a reference to Rule 506(e) disclosure. Neither entry should be written as a finding of fact about any real issuer.
Two drafting cautions follow from the rule's design. First, the disqualification attaches to the offering's reliance on Rule 506(b) and 506(c); it is not a general prohibition on the issuer doing business. Second, the disclosure track under Rule 506(e) is not a clearance. It is an obligation to disclose, and it exists precisely because the older event does not by itself bar the exemption.
What the source does not say
The materials reviewed do not establish the full text of Rule 506(d) or 506(e), the complete list of disqualifying events, or the precise content and timing of Rule 506(e) disclosures. They do not describe any particular issuer, offering, or covered person. They do not state penalties for noncompliance, nor do they address state-law consequences or later amendments to the rule.
They also do not resolve how a factual inquiry should be documented in practice, or whether any specific screening method satisfies the requirement. The Commission frames the document as an outline, not a substitute for the rule text. Any template built from it should say so.
What to record, in order
- Confirm the offering is intended to rely on Rule 506(b) or 506(c).
- List each covered person category from the table and the persons or entities mapped to it.
- For any identified event, record its date and compare it to September 23, 2013.
- Record the consequence: disqualification from Rule 506(b) and 506(c), or Rule 506(e) disclosure.
- Note that the underlying rule text and the full event list still need to be consulted.
The central takeaway is that the date of the event, applied across a defined set of covered persons, determines whether an issuer faces a bar on the exemption or a disclosure duty. That is the fact pattern to represent accurately, and the one a template should not blur.