b'certain bad acts may have to be disclosed to investors in the offering materials. The issuer is required to make an inquiry to every potentially covered person to determine whether any of the Bad Actor prohibitions or disclosure obligations apply to them. To facilitate this for our clients, we require all members of management of an issuer (or members whose ownership triggers the inquiry) to undergo a Bad Actor/Background check before they can be named in the management or allowed to own more than 20% of any voting class of securities offered by the issuer. Require notice filings with the SEC and/or state securities agencies. This is fully discussed in Chapter 10.Because securities exemptions are self-executing, the asset manager has the burden of proving the issuer complied with the rules of its selected exemption.ThinkofthislikeanInternalRevenueService(IRS)tax deduction; if you meet the IRS criteria for a deduction, you can claim it, but if you are audited, you must provide documentation proving you qualified for the deduction, or it will be disallowed. If your exemption is disallowed, you could be found to have violated securities laws at the federal level, and in every state where you sold securities, triggering multiple enforcement actions. Investor Qualifications Before discussing the different exemptions, we need to define some of the terms that appear in this chapter. See the SEC publication at our Book Bonus page:43'