As previously covered, FINRA stated that the proposal is intended to enhance the rule by simplifying its provisions, while simultaneously maintaining critical protections for market participants. Further, the proposal would also update cross-references and make technical changes to other FINRA rules as a result of the proposed amendments to the corporate financing rule.
In response to public feedback, FINRA proposed amendments to Rule 5110 intended to reduce regulatory costs and burdens. Specifically, FINRA proposed, among other things:
- clarifying and reducing filing requirements;
- codifying filing requirement exemptions for certain shelf offerings;
- expanding and clarifying the scope of Rule 5110 exemptions;
- amending the definition of "underwriting compensation";
- modifying, clarifying and expanding the venture capital exceptions;
- clarifying the treatment of non-convertible or non-exchangeable debt securities and derivatives;
- clarifying "lock-up" restrictions and adding an exception from such restrictions for certain securities acquired from an issuer;
- modifying and clarifying the list of prohibited unreasonable terms and arrangements related to a public offering of securities;
- consolidating and modernizing certain defined terms under Rule 5110; and
- modifying the proposed Supplementary Material .01(a)(7) concerning underwriting compensation.
Comments must be submitted by January 21, 2020.