The amendments simplify and refine the scope of FINRA’s corporate financing and conflict of interest rules in several important respects.
The Securities and Exchange Commission (SEC) recently approved two proposals from the Financial Industry Regulatory Authority, Inc. (FINRA) to amend FINRA Rules 5110 (Rule 5110 or the Corporate Financing Rule) and 5121 (Rule 5121 or the Conflict of Interest Rule) (collectively, the Rules). Together, the changes modify the scope of FINRA’s rules relating to FINRA members participating in public offerings by:
• Excluding from the Corporate Financing Rule’s definition of “participation or participating in a public offering” a FINRA member that acts exclusively as an “independent financial adviser”
• Excluding from the current lock-up restrictions of the Corporate Financing Rule certain securities acquired by a participating member (as defined in Rule 5110) as a result of an issuer reorganization or conversion to prevent dilution
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