FINRA’s Proposed Change to Rules 5122 and 5123

FINRA’s Proposed Change to Rules 5122 and 5123

On October 28, 2020, FINRA filed a proposed rule change to amend Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) that would require members to file retail communications concerning Private Placement offerings. Previously, Rules 5122 and 5123 required all offering documents to be filed with FINRA. However, they weren’t specific enough to include all documents that should have been considered offering documents, such as retail communications.

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Disclosures and Attestations for Associated Persons

Associated person disclosures and attestations are not a “one size fits all” list of documents. The purpose of disclosures and attestations is to educate your employees on the expectations of the firm based on firm procedure and regulatory mandates. Another important purpose is to give representatives a chance to know relevant updates and changes that may require pre-approval and/or added compliance responsibilities.

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Digital Communication

Digital Communications: 2019 FINRA Report

In the recent “2019 Report on FINRA Examination Findings and Observations,” one of the topics highlighted was the use of digital communications. This can include a wide range of social media, email, text messaging, and various other digital tools. The regulatory requirements pertaining to the usage of digital communications are outlined in Exchange Act Rule 17a-3 and 17a-4 and FINRA Rules 3110(b)(4) and 4510. These rules require procedures pertaining to the usage of these types of communications, as well as the appropriate maintenance of the communications in the form of books and records.

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FINRA Rule 2210 and Social Networking Websites

FINRA Rule 2210 requires that firms retain records of communications that relate to their “business as such” under Rule 17a-4(b) of the Securities Exchange Act of 1934 (SEA).  Therefore, it is the content of the broker’s communication that determines whether it is regulated under Rule 2210.   However, how does the rule apply if the firm or its registered representatives are not the authors of the content?  What if the content is created by a third-party?  We will discuss how the Rule 2210 applies in such scenarios. Third-Party Sites As explained by FINRA, posts by customers or other third parties on Read more about FINRA Rule 2210 and Social Networking Websites[…]