On June 20, 2013, FINRA filed an immediately effective amendment to Rule 5123, Private Placements of Securities, to codify the requirement that members provide the required information by using the electronic Private Placement Form and filing it via FINRA Firm Gateway (see FINRA Regulatory Notice 12-40). FINRA also proposed, effective immediately, that the Form include additional due-diligence information, to the extent known by the member, concerning the offering, the issuer and its management, but would permit members to respond "unknown" if the member's diligence had not revealed such information. Therefore, in FINRA's view, the additional obligations do not impose any obligation on broker-dealers to seek out information that they do not already have, while assisting FINRA in fulfilling its regulatory responsibilities by providing critical information regarding the nature of the offering, involved parties and the member's role in offering the securities. In our view, these additional disclosure obligations are a means for FINRA to determine whether members are satisfying their diligence obligations in private placements. For additional information about these amendments, see Release No. 34-69843; File No. SR-FINRA-2013-026; http://www.sec.gov/rules/sro/finra/2013/34-69843.pdf. For information on a member firm's responsibilities to conduct a reasonable investigation of private placement issuers, See FINRA Regulatory Notice 10-22 (April 2010), http://www.finra.org/Industry/Regulation/Notices/2010/P121299.
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.
© Morrison & Foerster LLP. All rights reserved
