FINRA Proposes Changes to its Private Placement Filing Requirements to Include Retail Communications

      FINRA recently submitted a proposal to amend FINRA Rule 5122 (“Private Placements of Securities Issued by Members”) and FINRA Rule 5123 (“Private Placements of Securities”) to require that members who offer such securities file retail communications concerning the offering. Examples of these retail communications can include web pages that promote the offering, slide presentations, pitch decks, one-page ‘teasers,’ fact sheets, sales brochures, executive summaries, and investor packets.

      Currently, the rules do not require retail communications to be filed with FINRA’s Advertising Regulation Department. But some firms file them anyway along with the documents that must be filed with FINRA’s Corporate Finance Department (e.g., PPM, term sheet or other offering document). An analysis of the retail communications submitted in these filings revealed to FINRA that many retail private placement communications were misleading and, in fact, 76% did not comply with FINRA’s advertising Rule 2210.

      Because of this, FINRA is proposing to amend Rules 5122 and 5123 to require such retail communications to be filed in addition to the currently required PPMs, term sheets, and other offering documents. FINRA proposes to limit the new filing requirement to private placements sold to retail investors, regardless of whether they accredited or not. The proposal would not require members to file private placement retail communications for offerings that are not subject to the filing requirements in Rules 5122 or 5123, such as sales exclusively to institutional accounts.

      FINRA subsequently has responded to comments received and amended its draft rules to reference retail communications and Rule 2210 more clearly. The filing is again open to comments and rebuttals until March 8, 2021.

      Previous post Next post
      Share

      More like this

      OCIE Risk Alert - Large Trader Obligations

      The SEC’s Office of Compliance Inspections and Examinations (“OCIE”) recently issued a Risk Alert concerning SEC-registered investment advisers (“investment advisers”)…
      Read more

      30-Day Extension for Filing Annual Reports for Certain Broker-Dealers

      On February 12, the SEC extended the deadline for certain smaller broker-dealers to file their annual reports by 30 calendar…
      Read more

      SEC Issues Statement and Requests Comment Regarding the Custody of Digital Asset Securities

      The SEC recently issued a statement and request for comment regarding the custody of digital asset securities by broker-dealers in…
      Read more

      The State of New York Approves Mandatory Registration Requirements for IA Representatives

      Commencing February 1, 2021, New York state is mandating enhanced examination and registration requirements for natural persons representing investment advisors.…
      Read more

      CFTC Staff Provides Limited Continuation of Certain No-Action Relief

      The Market Participants Division (MPD) and the Division of Market Oversight (DMO) of the CFTC recently announced extensions to temporary…
      Read more

      NFA Notice to Members I-21-02

      In NFA Notice to Members I-21-02, the NFA reminds its Members who claim an exemption from CPO registration must annually…
      Read more