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Bad Actor Disqualification Review

Rule 506(d) Bad Actor Reviews in Minutes, Not Hours

12 minutes with Para

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Para is an AI colleague for legal teams. Send it this work by email, Teams or Slack, and it hands back the finished document.

12 minutes with Para

What you'll need

  • Offering Documents
  • Organizational Documents
  • Covered Persons Data

Plans from $20 a month, with usage included.

Workflow

Overview

CaseMark's Bad Actor Disqualification Review automates the complex, high-stakes process of Rule 506(d) compliance for private securities offerings. The AI builds a comprehensive covered persons register, generates tailored questionnaires for each disqualifying event category, and produces a documented reasonable-care diligence record that protects your offering from exemption-destroying oversights.

A single overlooked disqualifying event involving any covered person can destroy a Rule 506 exemption, eliminate NSMIA preemption across all 50 states, trigger rescission rights, and expose issuers to enforcement actions. The covered persons net is broader than most practitioners realize, lookback periods vary by event category, and manual screening across multiple regulatory databases is time-intensive and error-prone.

CaseMark automates the entire Rule 506(d) diligence workflow—from identifying every covered person across complex ownership structures to generating tailored questionnaires, classifying flagged events, and documenting a defensible reasonable-care record. What previously required days of manual research and cross-referencing is delivered as a structured, export-ready diligence package in minutes.

How to hand this to Para

  1. 1. Send Para the files

    Email them, drop them in a Teams or Slack message, or upload them.

  2. 2. Para runs the Bad Actor Disqualification Review skill

    It works from your files and checks its citations against the record.

  3. 3. The finished document comes back

    Para returns it where you asked, usually as a DOCX, and offers the next step.

Example request · email, Teams or Slack
Para, run the Bad Actor Disqualification Review skill for the Garcia matter. I've attached the Offering Documents, Organizational Documents and Covered Persons Data. Send the finished draft back here as a DOCX.

What Para does

  1. 1. Upload your offering documents, organizational records, and covered persons data
  2. 2. AI identifies all covered persons across the full beneficial ownership chain and maps disqualifying event categories
  3. 3. Review the generated register, questionnaires, event classifications, and remediation recommendations
  4. 4. Export the complete diligence package in your preferred format (DOCX, PDF)

What you get

  • Covered Persons Register

  • Tailored Bad Actor Questionnaires

  • Disqualifying Event Classification Analysis

  • Reasonable-Care Diligence Record

  • Remediation and Disclosure Recommendations

  • Lookback Period Compliance Summary

What it handles

  • Comprehensive covered persons register with beneficial ownership chain mapping

  • Tailored questionnaires mapped to each disqualifying event category

  • Documented reasonable-care diligence record for defensible compliance

  • Classification analysis of flagged events with severity and lookback assessment

  • Remediation pathways and disclosure recommendations for identified issues

  • Automated cross-referencing of SEC, FINRA, and state regulatory databases

Required documents

  • Offering Documents

    Private placement memorandum, term sheet, or subscription agreement for the Rule 506 offering

    .pdf, .docx

  • Organizational Documents

    Charter, bylaws, operating agreement, board consents, and cap table showing full beneficial ownership chains

    .pdf, .docx

  • Covered Persons Data

    Officer and director lists, promoter arrangements, placement agent agreements, and per-person identifiers including legal names, roles, and registration numbers

    .pdf, .docx, .xlsx, .csv

Supporting documents

  • Prior Form D Filings

    Previously filed Form D submissions for the issuer or affiliated entities

    .pdf, .docx

  • Enforcement and Regulatory History

    Known SEC orders, FINRA BrokerCheck reports, state regulatory actions, or criminal records involving covered persons

    .pdf, .docx

  • Solicitation Agreements

    Placement agent, finder, broker-dealer, or funding portal agreements identifying specific soliciting individuals

    .pdf, .docx

Why teams use it

Eliminate the risk of missing covered persons hidden in complex ownership chains, voting agreements, and solicitation arrangements

Generate questionnaires precisely mapped to all eight disqualifying event categories with correct lookback periods

Build a defensible reasonable-care record that protects the offering if unknown disqualifying events later surface

Receive actionable remediation pathways and disclosure recommendations for any flagged events

Questions

What types of disqualifying events does this review cover?

CaseMark's review covers all eight categories of disqualifying events under Rule 506(d), including criminal convictions, SEC and state regulatory orders, SRO disciplinary actions, SEC cease-and-desist orders, suspension or expulsion from SRO membership, SEC stop orders, and U.S. Postal Service false representation orders. Each event type is analyzed with its specific lookback period.

How does CaseMark identify all covered persons for my offering?

CaseMark analyzes your cap table, organizational documents, officer and director lists, promoter arrangements, and solicitation agreements to build a comprehensive covered persons register. This includes tracing beneficial ownership chains, identifying specific soliciting individuals at broker-dealers, and flagging persons who meet the Rule 405 promoter definition.

Does this help establish a reasonable-care defense?

Yes. CaseMark generates a documented reasonable-care diligence record that demonstrates the steps taken to identify and evaluate potential disqualifying events. This structured record is designed to support a defensible reasonable-care position under Rule 506(d)(2)(iv) if a previously unknown disqualifying event surfaces.

Can this handle both Rule 506(b) and 506(c) offerings?

Absolutely. CaseMark tailors the analysis based on whether your offering is conducted under Rule 506(b) or 506(c), accounting for differences in solicitation scope and the corresponding covered persons universe. The questionnaires and diligence steps are adjusted accordingly.

What if a disqualifying event is identified—does CaseMark recommend next steps?

Yes. When a potential disqualifying event is flagged, CaseMark classifies its severity, confirms the applicable lookback period, and provides specific remediation or disclosure recommendations. This includes guidance on whether a waiver application to the SEC may be appropriate and what pre-existing event disclosures are required under Rule 506(e).

How current is the regulatory data used in the analysis?

CaseMark's AI analyzes the documents and data you provide, including enforcement histories and regulatory filings. For the most defensible results, we recommend uploading the latest FINRA BrokerCheck reports, SEC EDGAR filings, and any known state regulatory records alongside your offering documents.

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