Legal Definitions - bad-boy provision

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.