Rule 507 and the bad actor rules
Two sets of rules can take Regulation D away: Rule 507, for issuers enjoined over Form D, and the broader bad actor rules in Rule 506(d) that also apply to Rule 504.
Last reviewed November 2026
Rule 507
Rules 504 and 506 aren’t available to an issuer if the issuer, a predecessor or an affiliated issuer is subject to a court order or injunction for failing to comply with Rule 503, the Form D filing rule. The SEC can waive the disqualification for good cause.
The bad actor rules
Rule 506(d) disqualifies an offering if the issuer or a covered person has a disqualifying event. Rule 504(b)(3) applies the same rules to Rule 504.
Covered persons
- The issuer, its predecessors and affiliated issuers
- Directors, executive officers, other officers participating in the offering, general partners and managing members
- Owners of 20% or more of the issuer’s voting equity
- Promoters connected with the issuer at the time of sale
- Investment managers of pooled investment funds
- Anyone paid to solicit investors, and their general partners, managing members, directors, executive officers and officers participating in the offering
Disqualifying events
- Criminal convictions connected with securities, false SEC filings or the business of a broker, dealer, investment adviser or paid solicitor, within 10 years (5 years for the issuer and its predecessors and affiliates)
- Court injunctions on the same subjects within 5 years
- Final orders of state securities, banking or insurance regulators, federal banking agencies, the CFTC or the NCUA that bar the person, or that are based on fraudulent, manipulative or deceptive conduct within 10 years
- SEC disciplinary orders against brokers and advisers that are still in effect
- SEC cease-and-desist orders within 5 years for scienter-based fraud or violations of Section 5
- Suspension or expulsion from a self-regulatory organization such as FINRA
- SEC stop orders and Regulation A suspension orders within 5 years
- U.S. Postal Service false representation orders within 5 years
Exceptions and waivers
- Events before September 23, 2013 don’t disqualify a Rule 506 offering but must be disclosed to investors in writing a reasonable time before sale. For Rule 504, events before January 20, 2017 don’t disqualify.
- An issuer isn’t disqualified if it shows it didn’t know, and with reasonable care couldn’t have known, about the event.
- The SEC can grant waivers, and the court or regulator that issued an order can state in writing that it shouldn’t disqualify the issuer.
Ask every covered person to complete a bad actor questionnaire before you start, and update it before each closing. Our subscription agreements include bad actor representations for investors who will own 20% or more.
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