FINRA Announces Effective Date of New Rule 5123 Requiring Submission of Offering Documents for Certain Private Placements
September 10, 2012
On September 5, 2012, the Financial Industry Regulatory Authority, Inc. (“FINRA”) announced a December 3rd effective date for new FINRA Rule 5123 (Private Placements of Securities). Upon effectiveness of the Rule, FINRA members that sell certain securities in private placement transactions under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D to individual, non-institutional investors who do not meet limited exemption criteria will be required to file the offering documents used, or file a notice stating no offering document was used, with FINRA within 15 days after the date of first sale. FINRA members also will have to file any material amendments to any filed offering document within 15 days after the date of first sale made using the amended document. All filings made under FINRA Rule 5123 will be confidential and submitted electronically through the FINRA Firm Gateway system.
FINRA Rule 5123 will not apply to many of the most common private placement transactions, including (i) sales pursuant to Rule 144A or Regulation S, (ii) sales to qualified institutional buyers (QIBs), institutional accredited investors, qualified purchasers, employees and affiliates (as defined in FINRA Rule 5123) of the issuer, eligible contract participants, or knowledgeable employees (as defined in the Investment Company Act), even if sales are made pursuant to Section 4(a)(2) or Rule 506, and (iii) sales of certain investment grade, non-convertible debt or preferred securities or certain short-term debt securities. Additionally, the filing required by FINRA Rule 5123 is a “notice” filing only. FINRA will not conduct any pre-sale review or clearance of any private placement offering documents.
FINRA Regulatory Notice 12-40, announcing the effective date and including the full text of FINRA Rule 5123, may be accessed by clicking here.
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Please contact any of our partners and counsel listed under “Capital Markets” or any of your other regular contacts at the firm for further information about the matters discussed above.