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.

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