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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Compliance Surveillance

Compliance Surveillance Trends During COVID-19

The messages are clear. Sales practice concerns, fraud, and operational issues related to the COVID-19 pandemic have arrived. Compliance professionals who are responsible for the surveillance and review of targeted areas of the compliance program should understand what may be coming down the pipe and ensure that their programs are sufficiently flexible to identify potential red flags.

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Private Placement Basics – Part II

[Continued from Private Placement Basics – Part I]

Due Diligence and the Suitability of Private Placements

The SEC’s recent amendments to Regulation D in accordance with the JOBS Act do not diminish a firm’s responsibility to conduct adequate due diligence on its offerings to ensure that any recommendations made to potential investors to purchase securities in a private placement are suitable. Additionally, as private placement sales activities continue to be among FINRA’s list of regulatory hot topics, FINRA will examine firms’ private placement activity to determine if firms are taking reasonable steps to confirm that investors meet accredited investor standards.

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private placement

Private Placement Basics – Part I

Broker-dealers that are active in the sale or solicitation of private placement offerings have additional requirements under FINRA and SEC rules. These requirements include filing certain offering documents with reference to any investments solicited and/or sold to clients of the firm. Read More…

FINRA Updates Private Placement Filer Form Pursuant to FINRA Rules 5122 and 5123

FINRA has updated the form that firms must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (Filer Form). The updated Filer Form, which became available in the FINRA Firm Gateway in May of 2017, includes new and updated questions that will facilitate review of the filed material and eliminates other questions.  Read More…

Private Placement Filing Requirements under FINRA Rule 5123

In recent years, FINRA has enacted new rules regarding private placement transactions of FINRA member firms – FINRA Rule 5122 (Private Placements of Securities Issued by Members) and FINRA Rule 5123 (Private Placement of Securities).  Each of these rules has its own filing requirements, as well as specified exemptions from such filings.  We previously touched on FINRA Rule 5122 and member private offerings.  In this entry, we will focus on FINRA Rule 5123 and the filing requirements of private placement offerings in general. Read More…