b'Ponzi schemes, where new investor funds need to be raised to pay back previous investors. Violating Securities Laws Its best to steer clear of anyone whom you know or suspect is violating securities laws, regardless of whether you are participating as a passive investor or actively involved in management of a syndicate or fund where securities violations are occurring. Issuers who get in trouble with securities regulators are likely to use investor funds for their defense.Following are some of the most common securities violations that asset managers must guard against: Admitting Bad Actors to Management Its also essential for asset managers to run background checks on all of the people they admit to the asset management entity. Certain bad actors who have been in trouble with securities regulators in the past are prohibited from participating in management of a company engaging in Regulation D, Rule506orothersecuritiesofferings.Itstheissuers(i.e.,theasset managers) responsibility to police this. We do bad actor and background checks on all members of the asset management entity as a courtesy for our clients, but if they admit someone to the asset manager and dont tell us, we cant help them.287'