On September 5, 2012, the Financial Industry Regulatory Authority (“FINRA”) issued a regulatory notice informing members that new FINRA Rule 5123—Private Placements of Securities, which was approved by the Securities and Exchange Commission (“SEC” or the “Commission”) on June 7, 2012, will take effect on December 3, 2012, and will apply prospectively to private placements that begin selling efforts on or after that date. In light of the impending implementation date, this Client Alert reviews the requirements of the rule, which will impact both FINRA member firms and certain companies raising capital in private placements.
Overview of Rule 5123 -
Subject to broad exceptions discussed below, Rule 5123 requires each FINRA member firm that sells an issuer’s securities in a private placement to file with FINRA a copy of any private placement memorandum (“PPM”), term sheet or other offering document the firm used within 15 calendar days of the date of the sale, or indicate to FINRA that it did not use any such offering documents. The rule requires firms to file any materially amended versions of the documents originally filed. Firms must file the required offering documents or provide the notification electronically with FINRA through the FINRA Firm Gateway.
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