Comment Letter on SEC’s Proposed Rule Disqualifying Felons and Other ‘Bad Actors’ from Rule 506 Offerings

MFA filed a comment letter with the Securities and Exchange Commission in response to the SECs proposed rule that would disqualify certain bad actors from relying on Rule 506 of Regulation D when conducting private offerings. In our letter, we encouraged the SEC to: (1) modify the proposed rule to avoid unfair retroactive application of the rule, particularly with respect to persons who previously entered into negotiated settlements with regulators; (2) provide guidance on the waiver process for firms subject to disqualification (particularly for firms that would be captured if the SEC ultimately decides to apply the rule retroactively); and (3) focus the scope of disqualifying orders on scienter-based violations, consistent with the statutory intent underlying Section 926 of the Dodd-Frank Act.