The U.S. Securities and Exchange Commission (SEC) has issued a waiver that removes Ripple’s “bad actor” disqualification. This makes private fundraising substantially easier for Ripple.
Regulation D, explained
Under Rule 506(d) of the Securities Act, a company gets labeled as a “bad actor” and gets disqualified from the Rule 506 exemptions if it is subject to violations of the securities laws.
The label automatically disqualifies companies from using Rule 506 exemptions under Regulation D, which makes it possible for companies to secure unlimited funds from accredited investors without a cumbersome and time-consuming SEC registration process.
Startups, including cryptocurrency companies, tend to use this tool for securing funds instead of going public since they can save time and legal costs.
The tag makes private fundraising way more challenging and pre-IPO fundraising way less lucrative.
What it means for Ripple
The permanent injunction that was imposed on Ripple by Judge Analisa Torres disqualified Ripple from using Rule 506.
This essentially blocked the easiest fundraising path for Ripple for a total of five years.
However, now that the SEC has issued a waiver, Ripple can avoid this roadblock.
