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FINRA Proposes Changes to its Private Placement Filing Requirements to Include Retail Communications

November 4th | 2020


FINRA recently submitted a proposal to amend FINRA Rule 5122 ("Private Placements of Securities Issued by Members") and FINRA Rule 5123 ("Private Placements of Securities") to require that members who offer such securities file retail communications concerning the offering. Examples of these retail communications can include web pages that promote the offering, slide presentations, pitch decks, one-page 'teasers,' fact sheets, sales brochures, executive summaries, and investor packets.


Currently, the rules do not require retail communications to be filed with FINRA’s Adverising Regulation Department. But some firms file them anyway along the documents that must be filed with FINRA’s Corporate Finance Department (e.g., PPM, term sheet or other offering document). An analysis of the retail communications submitted in these filings revealed to FINRA that many retail private placement communications were misleading and, in fact, 76% did not comply with FINRA’s advertising Rule 2210.


Because of this, FINRA is proposing to amend Rules 5122 and 5123 to require such retail communications to be filed in addition to the currently required PPMs, term sheets, and other offering documents. FINRA proposes to limit the new filing requirement to private placements sold to retail investors, regardless of whether they accredited or not. The proposal would not require members to file private placement retail communications for offerings that are not subject to the filing requirements in Rules 5122 or 5123, such as sales exclusively to institutional accounts.

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