FINRA Seeks to Monitor Broker Compensation in Non-Member Private Offerings Through Pre-Filing Requirement


Recent efforts by the Securities and Exchange Commission to rein in unregistered brokers engaged in private placement activity have been complemented by a shift in the approach of the Financial Industry Regulatory Association (“FINRA”) toward such private offerings. In public offerings, FINRA and its predecessors have for many years required that member firms submit their compensation arrangements for approval prior to the commencement of selling efforts. Now FINRA is proposing to amend its Rule 5122 to require for the first time that private offering documents for non-member issuers be filed in advance so that FINRA can monitor broker compensation as well as certain other disclosures.

Partner Stephen M. Goodman, a member of Pryor Cashman’s Corporate Group, has authored an informative Legal Update, entitled "FINRA Seeks to Monitor Broker Compensation in Non-Member Private Offerings Through Pre-Filing Requirement," describing the proposed amendments to Rule 5122 and discussing issues which could arise if the Rule is amended as proposed.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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