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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

FINRA’s Private Placement Concerns

Posted in FINRA Compliance, FINRA Enforcement, Private Placements, Uncategorized

FINRA is beginning investigations into private placements.  New FINRA Rule 5123 requires member firms involved in a private stock offerings to provide investors with detailed information on the transaction prior to the sale, and to file that information with FIRNA within 15 days after the first sale. The rule went into effect in December 2012.

FINRA is now reviewing the materials submitted by member firms.  In particular, FINRA has found issues regarding the private offerings.  Many of the enterprises had little or no cash flow raising specific concerns at FINRA.

Accordingly, broker-dealers, who sell private placements, will most likely be subject to new scrutiny.