The Securities and Exchange Commission (“SEC”) on May 25, 2011 proposed amendments to Rules 501 and 506 of Regulation D and to Form D in order to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Specifically, the proposed amendments disqualify securities offerings involving “felons and other ‘bad actors’” from relying on the safe harbor from registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), provided by Rule 506 of Regulation D.

Rule 506 is the most widely used Regulation D exemption, accounting for approximately 90-95% of all Regulation D offerings.1 Rule 506 allows an unlimited dollar amount of securities to be sold, without registration, to an unlimited number of accredited investors and up to 35 non-accredited investors, provided that there is no general solicitation, resale limitations are imposed, applicable information requirements are met and the other conditions set forth in the rule are satisfied.