SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities (FINRA Regulatory Notice)

The SEC approved new FINRA Rule 5123 (text of rule included in attached FINRA notice) to require each FINRA member firm that sells an issuer's securities in a private placement, subject to certain exemptions, to file with FINRA a copy of any private placement memorandum, term sheet or other offering document the firm used within 15 calendar days of the date of the sale, or to indicate that it did not use any such offering documents. Firms must file the required offering documents electronically with FINRA through the FINRA Firm Gateway. The rule becomes effective December 3, 2012, and applies prospectively to private placements that begin selling efforts on or after that date.

In addition, effective December 3, 2012, firms must submit filings regarding member firm private offerings (MPOs), as required by FINRA Rule 5122 (Private Placements of Securities Issued by Members), through the Firm Gateway.

The attached notice also cites to FINRA Notice 10-22 (discussing due diligence responsibilities in connection with private placements) and indicates that the combination of the new Rule and that Notice is indicative of a greater regulatory focus on private placements.

Ceoss Reference(s): FINRA Rule 5110 (Corporate Financing Rule -- Underwriting Terms and Arrangements); Regulatory Notice 09-27; Regulatory Notice 10-22.

View regulatory notice here(links externally to FINRA website).