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Corporate Financing Amended Rule 5110* Frequently Asked Questions (FAQ)

Filing Requirements


1. Amended Rule 5110(a)(4)(A)(iii) requires filing marked pages showing changes to documents previously filed if there are changes that impact the underwriting terms and arrangements. Does this provision apply to registration statement amendments?
Yes. 
2. With respect to amended Rule 5110(a)(4)(A)(iii), what are examples of changes in documents that could impact the underwriting terms and arrangements?
Examples of changes in documents that could impact the underwriting terms and arrangements include an increase or decrease to the anticipated offering size, changes to the method of distribution and changes to the participating members or the services for which members are engaged.

Lock-Up Restrictions on Securities


1. Must securities that are subject to Rule 5110’s lock-up requirement continue to be locked-up after the September 16, 2020 effective date of the amended rule if they meet one of the new exceptions added by the amendments?
No.

Shelf Offerings


1. What is the process for shelf offerings after September 16, 2020?
Amended Rule 5110(a)(4)(E) requires filers to file the registration statement number of the base shelf offering. FINRA will access the base shelf registration statement, amendments and prospectus supplements through EDGAR and populate the information necessary to conduct a review. Once the required registration statement number is filed, FINRA will provide a No Objections Letter. FINRA’s review of documents and information obtained from EDGAR and any additional materials FINRA requests pursuant to Rule 5110(a)(4)(E)(ii) will occur on a post-takedown basis. 
2. If a base shelf registration statement is filed before September 16, 2020 and there is a shelf takedown after September 16, 2020, is the shelf takedown required to be filed after the amended rule becomes effective?
No. FINRA will have the registration statement number and will access the takedown through EDGAR and populate the information necessary to conduct a review.

Definitions


1. Supplementary Material in amended Rule 5110.01(b)(12) provides that securities acquired under an employee benefit plan that qualifies under section 401 of the Internal Revenue Code or a “similar plan” are not considered underwriting compensation. What type of plan would qualify as a “similar plan,” in addition to those specifically referenced in the Supplementary Material?
A “similar plan” could include a written compensatory benefit plan for directors and employees that provides comparable grants of securities to similarly situated persons (e.g., a written compensatory benefit plan that provides comparable grants of securities to all qualifying employees) and is not “Underwriting Compensation,” as defined in amended Rule 5110(j)(22). A “similar plan” would not include a compensatory benefit plan that was developed or structured to circumvent the requirements of Rule 5110.   

Fees and Compensation to Foreign Affiliates


1. Can a member divide compensation with a foreign affiliate in a global offering in a manner that keeps it from being counted as underwriting compensation subject to Rule 5110?
Yes. If the member can separately allocate the compensation received by the non-U.S. broker-dealer for the non-U.S. portion of the global offering, FINRA would consider that separately allocated underwriting compensation to be outside the scope of Rule 5110 and not subject to the requirements of Rule 5110.

*Amended Rule 5110