FINRA Changes to Corporate Financing Rule 5110 Effective 9.16.2020

Earlier this summer, FINRA’s Board of Governors approved filing with the SEC proposed amendments to FINRA Rule 5110, which requires a member that participates in a public offering to file documents and information with FINRA about the underwriting terms and arrangements. FINRA’s corporate finance department reviews the information prior to the commencement of the offering to determine whether the underwriting compensation and other terms and arrangements meet the requirements of the applicable FINRA rules. The changes were designed to modernize the rule and improve its organization and readability. To that end, FINRA made changes to the following areas: (1) filing requirements; (2) filing requirements for shelf offerings; (3) exemptions from filing and substantive requirements; (4) underwriting compensation; (5) venture capital exceptions; (6) treatment of non-convertible or non-exchangeable debt securities and derivatives; (7) lock-up restrictions; (8) prohibited terms and arrangements; and (9) defined terms. The change to 5110 also necessitated changes to certain references in other rules, such as 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities). The rules are effective from September 16, 2020 onwards.