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Simple English definitions for legal terms
bad-boy provision
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A quick definition of bad-boy provision:
Bad-Boy Provision: A rule that says certain people who have done bad things in the past cannot get special treatment when selling investments. This rule usually stops people who have been in trouble for cheating with money from being involved in a small sale of investments.
A more thorough explanation:
A bad-boy provision is a clause in securities law that prevents certain individuals from receiving exemptions from registering their securities due to their past conduct. This provision is typically included in blue-sky laws and prohibits individuals who have been involved in adverse proceedings related to securities, commodities, or postal fraud from participating in limited offerings.
- An issuer who has been convicted of securities fraud in the past cannot participate in a limited offering.
- A broker-dealer who has been sanctioned by the SEC for violating securities laws cannot be involved in a limited offering.
These examples illustrate how the bad-boy provision works by preventing individuals with a history of misconduct from participating in certain securities offerings. This helps protect investors by ensuring that only trustworthy individuals are involved in the sale of securities.