Covered Persons

Who is a "Covered Person"?

On September 23, 2013 the SEC’s “Bad Actor Rule” went into effect with respect to private offerings under Regulation D. This Rule disqualifies any issuer from selling securities to investors through the use of Rule 506(b) and Rule 506(c) of Regulation D if it or any of its control persons (“covered persons”) have committed any of eight enumerated categories of bad acts. If any of the covered persons is disqualified, the offering may violate securities laws. The SEC requires any issuer selling securities to make a factual inquiry to determine whether any of the covered persons trigger disqualification.

SEC Definition of Covered Person

  • The company issuing securities, including its predecessor entities and affiliated entities issuing securities;
  • Directors, general partners, and managing members of the company;
  • Executive officers of the company, and other officers of the company that participate in the offering;
  • 20% beneficial owners of the company;
  • Promoters connected to the company;
  • Any person compensated for soliciting investors, including any directors, general partners and managing members of those solicitors; and
  • For pooled investment funds, the fund’s investment manager and its principals.


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