FINRA Issues Regulatory Notice Reminding Broker-Dealers of their Obligation to Conduct Reasonable Investigations in Regulation D Offerings

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On April 20, 2010, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 10-22 (the “Notice”) reminding broker-dealers of their obligation – enforceable under federal securities laws and FINRA rules – to conduct a reasonable investigation of the issuer and the securities they recommend in offerings made pursuant to Regulation D under the Securities Act of 1933 (the “Securities Act”).1 The Notice also reinforces the obligations of broker-dealers that recommend securities offered under Regulation D to comply with the suitability requirements of NASD Rule 2310, the advertising and supervisory rules of FINRA and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The following provides a summary of the Notice, including broker dealers’ regulatory responsibilities in Regulation D offerings, and the guidance set forth regarding broker-dealers’ reasonable investigation and suitability obligations, and addresses FINRA’s focus on enforcement.

Please see full bulletin below for more information.

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