FINRA Proposes Expanded Filing Requirements for Private Placements

On October 28, 2020, the Financial Industry Regulatory Authority (“FINRA”) submitted to the Securities and Exchange Commission (the “SEC”) a proposal for expanding the filing requirements with respect to private placements.  Currently, under Rule 5122 FINRA requires a member or one of its affiliates to provide to prospective investors, unless an exemption is available such as offers to institutional clients, a private placement memorandum (the “PPM”), term sheet or other offering document that sets forth the use of the proceeds, the offering expenses and the selling commission, and to file it with FINRA at or prior to its first use.  Rule 5123 requires a FINRA member to file with FINRA within 15 days of first sale, unless one of the exemptions  applies, a PPM, term sheet or other offering document.  The new proposals would expand the list of documents to cover any “retail communication”, defined as any written or electronic communication to more than 25 retail investors in any 30-day period.  The proposals are subject to SEC approval.