July 14, 2011
In response to questions 31, 32, 60, 61 and 62, it is important to provide a means for waiving the disqualification in appropriate cases. There are too many instances in which issuers, working with unsophisticated or ineffective counsel, make misrepresentations without any idea that they are doing so, either because they misunderstand the technicalities being discussed or the law that applies to them. Not all issuers or other covered persons who have an adverse final order issued against them are wilfully bad actors who present a risk of repeted misconduct.
In my opinion, the best way to address this issue is to allow the regulator issuing the order to express a view about whether the violation is the sort of violation that should give rise to disqualification under rule 506. This determination by a regulator should be self-executing, which is to say that the SEC waiver should be automatic without the need to petition the SEC for a waiver, if the regulator includes language in its order specifying that the violations found should not give rise to disqualification under Rule 506.