This enforcement action is a must read for broker-dealers selling interests in traditional private placements under 506(b). FINRA makes clear that the "pre-existing, substantive relationship" with a potential investor must be established prior to the broker-dealer being involved with that offering - prior to signing a placement agreement or prior to any due diligence of that offering. This could result in 506(c) offerings being a more attractive option for broker-dealers engaged in private placements.