FINRA Revises Filing Process for Underwriting Terms

FINRA adopted a rule change to "modernize, simplify and clarify" the filing process of underwriting terms and arrangements for members that participate in public offerings.

According to FINRA, Rule 5110 ("Corporate Financing Rule - Underwriting Terms and Arrangements"), as amended, implements a more efficient filing process for members by extending the amount of time to submit required filings from one business day to three. FINRA also issued several clarifications as to the processes required by Rule 5110, including:

• FINRA members that participate in an offering are not required to file with FINRA if another member involved in the offering submits the filing;
• a distribution cannot go forward unless FINRA affirms that it has no objection to the proposed underwriting terms and arrangements; and
• managing underwriters must notify other members involved in the related public offering if: (i) FINRA determines the underwriting terms and arrangements to be unfair and unreasonable; and (ii) the proposed terms and arrangements are not properly modified.

The amendments go into effect on September 16, 2020.