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Financial Services Law Insights and Observations

FINRA to require filing of retail communications for private placement offerings

Securities Agency Rule-Making & Guidance FINRA

Securities

On July 15, FINRA announced amendments to Rules 5122 and 5123 to require that members file retail communications that promote or recommend private placement offerings. Rule 5122 applies to private placements of unregistered securities issued by a member or a control entity, and requires that the member or control entity provide prospective investors with a private placement memorandum (PPM), term sheet, or other offering document that reveals the intended use of the offering proceeds and expenses, among other things. Rule 5123 requires that “members file with FINRA any PPM, term sheet or other offering document, including any material amended versions thereof, used in connection with a private placement of securities within 15 calendar days of the date of first sale.” According to FINRA, the amendments require a member to file retail communications with the FINRA Corporate Financing Department “no later than the date on which the member must file the private placement offering documents under Rules 5122 and 5123.” The amendments become effective on October 1.

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