July 12, 2011
Of course all bad actors should be disqualified... past and present. Especially considering that most of the individuals out there committing fraud and breaking regulatory and securities laws never get caught, then you must be really bad to actually get caught. Also, I compare bad acts to drunk driving. The drunk driver probably drives drunk 50 times before he gets caught. The same goes for bad actors, they just finally got caught on something.
Also, all bad actors need to be excluded. I have found that if they are really bad then they just put the name of the investment (the made up LLC) as the issuer, etc. and you dont really see who is running the company unless they mark themselves as the promotor or officer on the Form D.
I personally lost 360,000 in a Reg D offering (of course I didnt know what it was - if people actually knew what a Reg D offering was really about they would run). It turns out that almost every board member was a "bad actor" but since it was a 506 offering - they were allowed. It was not disclosed in the PPm but of course they just claim that the info wasnt "material".
For those that think acts prior to the law should be excluded, thats crazy. They cheated or lied or screwed somebody - they dont deserve a free pass to continue to do so. If you want Reg D offerings to ever have a chance as being thought of a legitimate to the investor then getting rid of all bad actors will be a start.