FINRA Updates Private Placement Filer Form

In an attempt to collect more information on private placement activity, the Financial Industry Regulatory Authority (“FINRA”) has updated the private placement filer form that member firms must use to file offering documents and information pursuant to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) (the “Filer Form”).  The updated Filer Form will be required to be utilized on the FINRA Firm Gateway beginning on May 22, 2017.

The Filer Form has three main components.  The “Participating Member Information” section seeks information about the firms that are selling the private placement, the “Issuer Information” section captures basic information about the issuer and the “Offering Information” section seeks information about the offering.

The updated Filer Form that FINRA is implementing adds, clarifies and eliminates questions or other information requested in each section.  The changes to the Filer Form include the following items.

Participating Member Information

FINRA has added questions to the Participating Member section of the Filer Form regarding whether the member making the filing (filing member) is the exclusive selling agent in the private placement and whether there is any affiliation between the issuer or sponsor of the private placement with any member participating in the offering upon whose behalf the filing member is submitting the filer form.  FINRA has noted that this section will no longer require the title and email address for the contact person of the filing member or the contact name, title and telephone number for other members identified in the filing.

Issuer Information

FINRA is adding a question to the Issuer Information section of the Filer Form asking whether the issuer is a reporting company.

Offering Information

FINRA has expanded the information available for review by adding questions to the Offering Information section of the Filer Form regarding:

  • the type of security the issuer is offering;
  • whether the issuer raised capital within the preceding 12 months from any source (excluding loans or investments by affiliates);
  • the minimum investment amount that the issuer will accept and whether the issuer can waive that minimum;
  • whether the filing member sold or will sell the offering to any non-accredited investors;
  • the exemption from the Securities Act of 1933 that the issuer is relying upon; and
  • for contingency offerings, whether the contingency has been met as of the date of the filing.

The Offering Information section also will request the date on which the filing member first offered or sold the private placement and allow the filing member to indicate that sales have yet to commence.  However, the Offering Information section will no longer include (i) requirements to provide the aggregate amount of non-commission compensation and the offering’s conclusion date; (ii) questions asking whether the firm used a term sheet, whether the issuer has any independently audited financial statements, and whether the issuer’s directors are independent.

The Offering Information section will also clarify that the requirement to provide the stated or target rate of return is relevant only if an offering document states that the investment will provide an actual or target rate of return to investors.  Finally, this section also will clarify the question regarding general solicitation only seeks information regarding whether the filing member or the issuer has, in fact, engaged in general solicitation in connection with the private placement at or before the time of filing.

For more information on the updates to the Filing Form, see FINRA Regulatory Notice 17-17.