FINRA Expands Filing Requirements for Private Placements
The Financial Industry Regulation Authority has expanded its filing requirements relating to private placements to include retail communications.
The Financial Industry Regulation Authority has expanded its filing requirements relating to private placements to include retail communications. The new filing requirements become effective on October 1, 2021.
The changes apply to Rule 5122 (private placements of securities issued by members) and Rule 5123 (private placements of securities) and will require members to file retail communications that promote private placement offerings.
Retail communications can include web pages, slide presentations, pitch decks, one-page “teasers,” fact sheets, sales brochures, executive summaries and investor packets.
Rule 5122 applies to private placements of unregistered securities and requires prospective investors to be provided with a private placement memorandum, term sheet, or other offering document that discloses the intended use of the offering proceeds, the offering expenses and the amount of selling compensation that will be paid, and its associated persons.
The rule also requires the documents to be filed with FINRA’s corporate financing department before the document is given to a prospective investor. Many private offerings are exempt from the requirements, including those sold to institutional accounts, qualified purchasers, and qualified institutional buyers.
Rule 5123 requires members to file a PPM, term sheet or other offering document used with a private placement of securities within 15 calendar days of the date of first sale.
Prior to these amendments, Rules 5122 and 5123 did not require retail communications to be filed, although FINRA said that many members filed these communications with their required documents.
FINRA expects that members will file most retail communications at the same time and in the same manner that they file their other required documents. Material amendments to retail communications must also be filed, FINRA said.
The amendments do not apply to any offerings that are currently exempt from filing, such as sales exclusively to institutional accounts.
