May 25, 2011
Dear Madam Chairman,
With regard to the proposed rules related to felons and other "bad actors" under Reg. D Rule 506 offerings, I would like to draw your attention to my concerns related to preventing persons with a court order or injunction against them from utilizing such offerings within a five-year period of such disqualifying events.
My primary concern is that such injunctions or court orders may not be findings of guilt based upon a trial in which the person would have had an opportunity to be heard, to confront the witnesses against him or her, or to otherwise challenge such rulings and orders.
Although the SEC chould be concerned with protecting the investing public, it should balance such concerns with respect for the presumption of innocence in our legal system.
If the SEC is determined to, nonetheless, take notice of such non-conclusive findings of possible guilt of such disqualifying events, then I would respectfully suggest that the time period be shortened to no more than two years' time. If such a court order or injunction has not been allowed to proceed to a full hearing at which the party involved has been offered the opportunity to be heard and to challenge such an order or injunction, then I would think it inappropriate to hold such against the party.
In the alternative, the SEC may consider allowing such persons to proceed with a warning required to be given in the private placement memorandum or other disclosure document provided to prospective investors, allowing these primarily accredited investors to determine for themselves the risks and benefits of investing with such an issuer or person.
Thank you for your kind consideration.
Regards,
Ralph M. Sherman, Esq.
Founding Partner, The Law Offices of Ralph M. Sherman, P.C.
Southfield, MI 48076