FINRA: Firm Guidance – Private Placement Filings

This reference guide covers a range of private placement topics, from the basic question of “What is a private offering?” to more technical discussions on broker-dealer compliance with FINRA’s private placement rules.

1. The Basics – What Is a Private Placement?

Private placements are unregistered, non-public securities offerings that rely on an available exemption from registration with the Securities and Exchange Commission (SEC). Unregistered offerings of securities must rely on an exemption from registration under either Sections 3 or 4 of the Securities Act of 1933 (the ’33 Act[1].) Most private offerings, however, are sold pursuant to three “safe harbor” rules promulgated under the ’33 Act; Regulation D, Rules 504,[2] 506(b),[3] and 506(c).[4] These rules provide issuers with a clearer and more objective set of requirements for which their offerings may qualify for exemption from registration.

Of the approximate 4,000 FINRA-registered member firms, nearly a quarter (or 23%) have reported revenue from private placement activities during the past five years. Many of these firms are not frequent filers, having submitted fewer than five filings. The following information provides guidance which may be helpful to member firms that are either first-time or infrequent filers or have limited compliance resources.

Click here to read more about private placement topics!

FINRA Requests Comment on a Proposal to Publish ATS Volume Data

Regulatory Notice 19-22

Comment Period Expires: September 7, 2019

FINRA Requests Comment on a Proposal to Publish ATS Volume Data for Corporate Bonds and Agency Debt Securities on FINRA’s Website.

FINRA requests comment on a proposal to expand the alternative trading system (ATS) volume data that it publishes on its website to include information on transactions in corporate bonds and agency debt securities that occur within an ATS and are reported to FINRA’s Trade Reporting and Compliance Engine (TRACE).

Questions concerning this Notice should be directed to:

  • Chris Stone, Vice President, Transparency Services, at (202) 728-8457;
  • Patrick Geraghty, Vice President, Market Regulation, at (240) 386-4973;
  • Racquel Russell, Associate General Counsel, Office of General Counsel (OGC), at (202) 728-8363; or
  • Robert McNamee, Assistant General Counsel, OGC, at (202) 728-8012.

View Full Notice Here:

Margin Requirements for Exchange-Traded Notes

Regulatory Notice 19-21

Pursuant to FINRA Rule 4210(f)(8)(A), FINRA is establishing higher strategy-based margin requirements for exchange-traded notes (ETNs) and options on ETNs in light of the complex nature of these products.  The new requirements for initial and maintenance margin are detailed below.

In addition, FINRA is clarifying that ETNs and options on ETNs are not eligible for portfolio margining under FINRA Rule 4210(g).

If these measures would result in undue hardship to a firm or its customers, the firm may submit a written request to FINRA for additional time to comply with this Notice.

View Full Notice Here!

Questions concerning this Notice should be directed to:

  • Adam Rodriguez, Director, Credit Regulation, at (646) 315-8572;
  • Joseph David, Principal Specialist, at (646) 315-8444; or
  • Kathryn Moore, Associate General Counsel, Office of General Counsel, at (202) 728-8200.

FINRA Proposed Rule Change

SR-FINRA-2019-017 – Proposed Rule Change to Amend FINRA Rules 2210 (Communications with the Public) and 2241 (Research Analysts and Research Reports).

Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) proposed amendments to FINRA Rule 2210 (Communications with the Public) and FINRA Rule 2241 (Research Analysts and Research Reports) required by the Fair Access to Investment Research Act of 2017 (“FAIR Act”).

The proposed rule change would eliminate the “quiet period” restrictions in Rule 2241 on publishing a research report or making a public appearance concerning a covered investment fund and would create a filing exclusion under FINRA Rule 2210 for covered investment fund research reports.

Click here to read more regarding the proposed rule change.

FINRA Updates the OTCBB/OTC Equities High Price Dissemination List

FINRA is publishing its quarterly OTCBB/OTC Equities High Price Dissemination List for the first quarter of 2019. This updated list of OTC equity securities eligible for trade report dissemination for trades of fewer than 100 shares is effective as of June 14, 2019. To view changes, visit the Daily List: Security Attribute Changes page, select the “Unit of Trades” filter and enter June 13, 2019 as the “Start” date and June 14, 2019 as the “End” date.

As discussed in the FINRA March 18, 2008, Trade Reporting Notice, for all OTC equity securities that trade at or above $175.00, transactions of fewer than 100 shares are no longer considered “odd-lot” transactions for dissemination purposes. Instead, FINRA has designated the unit of trade for these securities as 1, and FINRA disseminates last sale information for all transactions of one or more shares in such securities. FINRA reviews trading activity quarterly to determine whether additional OTC equity securities meet the stated dissemination criteria.

If you have questions, contact FINRA Operations at (866) 776-0800.

SEC Approves Amendments to Arbitration Codes

Effective Date: July 1, 2019

SEC Approves Amendments to Arbitration Codes to Expand Time for Non-Parties to Respond to Arbitration Subpoenas and Orders of Appearance of Witnesses or Production of Documents

The Securities and Exchange Commission (SEC) approved amendments to FINRA’s customer and industry arbitration rules to expand time for non-parties to respond to arbitration subpoenas and orders of appearance of witnesses or production of documents. The amendments also make related changes to enhance the discovery process for forum users.

The amendments are effective for cases filed on or after July 1, 2019.

Questions concerning this Notice should be directed to: Leslie Leutwiler, Associate Director, Office of Dispute Resolution, at (212) 858-4136; or Kristine Vo, Principal Counsel, Office of General Counsel, at (212) 858-4106.

View Full Notice

Upcoming FINRA Board of Governors Election

The annual meeting of FINRA firms will take place on or about Monday, August 19, 2019, to elect one Large Firm Governor and one Small Firm Governor to the FINRA Board of Governors (FINRA Board). A formal notice of the meeting, including the precise date, time and location, will be mailed to executive representatives on or about July 19, 2019. 

The purpose of this Election Notice is to notify FINRA members of the FINRA Nominating Committee’s nominees to fill these vacancies and inform individuals not nominated by the Nominating Committee of the petition procedures set forth in FINRA’s By-Laws for being included on the ballot for these elections.

Questions regarding this Election Notice may be directed to Marcia E. Asquith, Executive Vice President and Corporate Secretary, or Jennifer Piorko Mitchell, Vice President and Deputy Corporate Secretary, by email or at (202) 728-8949.

Note: FINRA distributed this Notice electronically to the executive representative of each FINRA firm and posted it online at www.finra.org/Notices/Election/05242019. Executive representatives should circulate this Notice to their firms’ branch managers. 

View Full Notice

FINRA Reminds Firms to Register for CAT Reporting by June 27, 2019

FINRA is issuing this Notice to remind firms they must register with FINRA CAT, LLC (FINRA CAT) for reporting to the Consolidated Audit Trail (CAT). CAT registration commenced on March 18, 2019, and will run through June 27, 2019. All Industry Members, as defined under the CAT NMS Plan, that will have a CAT reporting obligation must register during this window.

Regulatory Notice 19-19

All questions regarding CAT registration should be directed to the FINRA CAT Helpdesk at (888) 696-3348.

Beyond Hollywood, Part II: AML Priorities and Best Practices

The world of money laundering is fast-paced and ever evolving as we learned on the last episode of FINRA Unscripted. That can make it difficult for a financial firm to develop and maintain a robust anti-money laundering program.

On this episode of FINRA Unscripted, we are joined once again by Blake Snyder and Jason Foye of FINRA’s AML Investigative Unit to discuss current priorities and best practices when it comes to anti-money laundering regulation.

Click below to read more:

http://www.finra.org/industry/podcasts/beyond-hollywood-part-ii-aml-priorities-and-best-practices

FINRA Provides Guidance to Firms Regarding Suspicious Activity Monitoring and Reporting Obligations

FINRA is issuing this Notice to provide guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310 (Anti-Money Laundering Compliance Program).

Regulatory-Notice-19-18

Questions concerning this Notice should be directed to: Victoria Crane, Associate General Counsel, Office of General Counsel, at (202) 728-8104; or Blake Snyder, Senior Director, Member Regulation, at (561) 443-8051.