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” if it has violated the securities laws.
The label automatically disqualifies such companies from using Rule 506 exemptions under Regulation D, which makes it possible for them 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 raising funds before considering going public since they can save time and legal costs.
However, 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 the San Francisco-based company 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.
