On September 5, 2012, FINRA published Regulatory Notice 12-40 announcing the SEC's approval of new Rule 5123. This rule requires any FINRA member firm that sells securities through a private placement, subject to certain exemptions, to electronically file any term sheet, private placement memorandum or other offering document with FINRA within 15 days of the sale of the privately placed securities, or alternatively, indicate that no such offering documents were used. FINRA will accord confidential treatment to all documents filed and will only utilize such documents for the purpose of determining compliance with FINRA rules or other regulatory purposes deemed appropriate by FINRA. In addition, Rule 5123 requires a FINRA member firm to file any materially amended versions of the documents originally filed.
Certain private placements are exempt from the requirements of Rule 5123, including, among others, offerings (i) to "qualified purchasers" as defined under the Investment Company Act of 1940; (ii) pursuant to SEC Rule 144A or Regulation S; and (iii) to certain "accredited investors" described in Rule 501(a)(1), (2), (3) and (7) under the Securities Act of 1933.
Rule 5123 is part of a series of FINRA rules designed to enhance oversight and investor protection in private placements. The rule will become effective on December 3, 2012 and will apply prospectively to private placements made (and which are not otherwise exempt) by FINRA member firms on or after that date.