Regulatory Notice 11-04

FINRA Requests Comment on Proposed Amendments to FINRA Rule 5122 to Address Member Firm Participation in Private Placements

Comment Period Expired: March 14, 2011

FINRA requests comment on a proposal to amend FINRA Rule 5122, which requires, subject to certain exemptions, disclosure in the offering document of the intended use of offering proceeds, expenses, and the amount of selling compensation to be paid to the broker-dealer and its associated persons, in any private placement in which a participating broker-dealer (or its control entity) is the issuer. The rule also requires that at least 85 percent of the offering proceeds must be used for the business purposes identified in the offering document. Lastly, the rule requires each offering document to be submitted to FINRA to allow the staff to conduct ex post reviews to assess compliance with the rule and to identify problematic terms and conditions.

The amendments proposed in this Notice expand Rule 5122 to reach all private placements in which a member firm participates—not just those in which the member firm (or its control entity) is the issuer—while retaining nearly all of the existing exemptions, including those for offerings sold solely to certain institutions, qualified purchasers and other sophisticated investors. However, to reflect the broader scope of the proposed rule and its prior experience with Rule 5122, FINRA proposes to eliminate the exemption for offerings in which a member acts primarily in a wholesaling capacity.

The text of the proposed rules is available as Attachment A to this Notice.

Questions regarding this Notice should be directed to:

  • Joseph E. Price, Senior Vice President, Corporate Financing/Advertising Regulation, at (240) 386-4623; or
  • Gary L. Goldsholle, Vice President and Associate General Counsel, Office of General Counsel, at (202) 728-8104.
The views, expressions, findings and opinions expressed in the comments on this Web page are solely those of the author(s) and FINRA accepts no responsibility for the content of the comments: 
DateCommenterFormat - Size
2/3/2011Schulten, Ward & TurnerPDF - 188.33 KB
1/19/2011Valerie LewisPDF - 11.82 KB
2/12/2011Balanced Financial SecuritiesPDF - 27.36 KB
2/18/2011Krieger & Prager, LLPPDF - 69.03 KB
3/1/2011Rothwell Consulting LLCPDF - 104.46 KB
3/4/2011Achates Capital Advisors LLCPDF - 25.37 KB
3/7/2011Moloney Securities Co., Inc.PDF - 15.18 KB
3/9/2011Weinstein Smith LLPPDF - 60.99 KB
3/10/2011Colonnade Securities LLCPDF - 37.37 KB
3/10/2011Itellivest Securities, Inc.PDF - 45.88 KB
3/10/2011Mick & Associates, P.C., LLOPDF - 106.17 KB
3/10/2011Network 1 Financial Securities, Inc.PDF - 682.83 KB
3/13/2011Locke Lord Bissell & Liddell LLPPDF - 367.19 KB
3/14/2011New York Bar AssociationPDF - 723.58 KB
3/14/2011Sutherland Asbill & Brennan LLPPDF - 1.6 MB
3/14/2011American Bar AsssociationPDF - 74.84 KB
3/14/2011Patrick Capital Markets, LLCPDF - 92.3 KB
3/14/2011St. Charles Capital, LLCPDF - 270.88 KB
3/14/2011REISAPDF - 203.12 KB
3/14/2011Walton Securities, Inc.PDF - 129.63 KB
3/14/2011IPAPDF - 102.35 KB
3/14/2011Saxony Securities, Inc.PDF - 305.7 KB
3/14/2011SIFMAPDF - 83.14 KB
3/14/2011Integrated Management Solutions USA LLCPDF - 762.37 KB
3/14/2011Ken GeorgePDF - 49.15 KB
3/14/2011National Investment Banking AssociationPDF - 134.28 KB
3/14/2011Sullivan & Cromwell LLPPDF - 213.76 KB
3/14/2011AOG Wealth ManagementPDF - 58.32 KB
3/14/2011The LeGaye Law Firm, PCPDF - 227.39 KB
3/14/2011Secore & Waller, L.L.P.PDF - 376.48 KB
3/14/2011Managed Funds AssociationsPDF - 200.4 KB
3/14/2011Cornell University Law SchoolPDF - 102.19 KB
3/15/2011Financial Services InstitutePDF - 103.94 KB
3/17/2011Third Party Marketers AssociationPDF - 154.34 KB
3/28/2011New York State Bar AssociationPDF - 34.98 KB