The U.S. Securities and Exchange Commission (SEC) has recently made a significant decision regarding Ripple, a popular cryptocurrency company. The SEC has issued a waiver that removes Ripple’s “bad actor” disqualification, making private fundraising much easier for the company.
Understanding Regulation D
Regulation D, specifically Rule 506(d) of the Securities Act, is designed to identify and disqualify companies that have violated securities laws. Companies labeled as “bad actors” are automatically disqualified from using Rule 506 exemptions under Regulation D. This disqualification can hinder a company’s ability to secure funds from accredited investors without going through the lengthy SEC registration process.
Many startups, including those in the cryptocurrency industry, rely on Rule 506 exemptions to raise funds privately instead of going public. This strategy helps them save time and legal costs associated with a traditional IPO.
Implications for Ripple
Prior to the SEC waiver, Ripple was facing a major obstacle due to a permanent injunction imposed by Judge Analisa Torres. This injunction disqualified Ripple from utilizing Rule 506 exemptions for a period of five years, making private fundraising challenging for the company.
With the recent waiver issued by the SEC, Ripple can now bypass this roadblock and access the Rule 506 exemptions for fundraising purposes. This development is crucial for Ripple as it opens up new opportunities for private fundraising and growth.