On March 17, 2017, FINRA filed with the SEC proposed changes to the Private Placement Filer Form (“Filer Form”) that FINRA members must complete when submitting private placement filings under FINRA Rules 5122 or 5123. The proposed changes will assist FINRA in evaluating the private placement activities of its members and assess whether members are conducting a reasonable investigation for private placements in which they participate. The proposed changes to the Filer Form will add, clarify and remove certain questions or information as summarized below:
- Participating Member Information. Additional questions would be included regarding whether the member making the filing is the exclusive selling agent in the private placement and whether there is any affiliation between any member participating in the private placement and the issuer or sponsor of the offering. FINRA members will no longer be required to provide the title and email address for the contact persons identified in the filing.
- Issuer Information. An additional question would be included asking whether the issuer is a reporting company. The name, title and email address of the contact person at the issuer will no longer be required.
- Offering Information. Additional questions would be included regarding: (i) the type of security being offered; (ii) whether the issuer has raised capital in the preceding 12 months; (iii) the minimum investment amount and whether such minimum can be waived by the issuer; (iv) whether the FINRA member making the filing sold or will sell the offering to any non-accredited investors; (v) which exemption under the Securities Act of 1933 the issuer is relying on; (vi) for contingency offerings, whether the contingency has been met as of the date of filing; and (vii) the date on which the FINRA member first offered or sold securities in the private placement or whether sales have yet to commence. The Offering Information section would no longer require the filer to provide: (a) the aggregate amount of non-commission compensation; (b) the private placement’s conclusion date; (c) whether the FINRA member used a term sheet; (d) whether the issuer has any independently audited financial statements; or (e) whether the issuer’s directors are independent. In addition, the Offering Information section would clarify that the requirement to provide the stated or target rate of return is relevant only if an offering document provides an actual or target rate of return to investors and that 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.
FINRA also clarified that filers would still have the option to respond “unknown” to any of the questions in the Filer Form.
The proposed changes are available at: https://www.finra.org/industry/rule-filings/sr-finra-2017-008.