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

Executive Summary

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.
View Full Notice PDF 158 KB

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.

Comments By Date Received
Valerie Lewis (PDF 12 KB) 1/19/2011
Schulten, Ward & Turner (PDF 188 KB) 2/3/2011
Balanced Financial Securities (PDF 28 KB) 2/12/2011
Krieger & Prager, LLP (PDF 70 KB) 2/18/2011
Rothwell Consulting LLC (PDF 104 KB) 3/1/2011
Achates Capital Advisors LLC (PDF 25 KB) 3/4/2011
Moloney Securities Co., Inc. (PDF 15 KB) 3/7/2011
Weinstein Smith LLP (PDF 61 KB) 3/9/2011
Mick & Associates, P.C., LLO (PDF 106 KB) 3/10/2011
Colonnade Securities LLC (PDF 37 KB) 3/10/2011
Itellivest Securities, Inc. (PDF 46 KB) 3/10/2011
Network 1 Financial Securities, Inc. (PDF 683 KB) 3/10/2011
Locke Lord Bissell & Liddell LLP (PDF 367 KB) 3/13/2011
American Bar Asssociation (PDF 75 KB) 3/14/2011
Ken George (PDF 49 KB) 3/14/2011
AOG Wealth Management (PDF 58 KB) 3/14/2011
Patrick Capital Markets, LLC (PDF 92 KB) 3/14/2011
Sutherland Asbill & Brennan LLP (PDF 1,674 KB) 3/14/2011
REISA (PDF 203 KB) 3/14/2011
Saxony Securities, Inc. (PDF 305 KB) 3/14/2011
Sullivan & Cromwell LLP (PDF 213 KB) 3/14/2011
The LeGaye Law Firm, PC (PDF 227 KB) 3/14/2011
Managed Funds Associations (PDF 200 KB) 3/14/2011
New York Bar Association (PDF 723 KB) 3/14/2011
Cornell University Law School (PDF 102 KB) 3/14/2011
Walton Securities, Inc. (PDF 129 KB) 3/14/2011
National Investment Banking Association (PDF 134 KB) 3/14/2011
Secore & Waller, L.L.P. (PDF 376 KB) 3/14/2011
St. Charles Capital, LLC (PDF 270 KB) 3/14/2011
SIFMA (PDF 83 KB) 3/14/2011
Integrated Management Solutions USA LLC (PDF 762 KB) 3/14/2011
IPA (PDF 102 KB) 3/14/2011
Financial Services Institute (PDF 104 KB) 3/15/2011
Third Party Marketers Association (PDF 155 KB) 3/17/2011
New York State Bar Association (PDF 35 KB) 3/28/2011