FINRA proposed a rule for SEC approval that would require FINRA’s membership, involved in a private stock offering, to provide detailed information on the transaction to investors prior to the sale, as well as to file such information with FINRA 15 days before the first sale.
This proposed Rule 5123 would require that offering materials used in these offerings, as well as the amount and type of compensation provided to a variety of people, be filed with FINRA. Further, any amendments would have to be filed with FINRA within 15 calendar days after the date the document is provided to a current or prospective investor. This new rule is also to be used in conjunction with Rule 5122, requiring certain disclosures in private placement offerings issued by the FINRA member or its affiliates. Nonetheless, the proposed Rule 5123 would exempt certain types of private placements sold to certain purchasers, including, but not limited to, institutional accounts, qualified purchasers, qualified institutional buyers under the Securities Act of 1933, Rule 144(a), and investment companies.
In sum, FINRA is taking an aggressive approach on reviewing private placements, thus, this or some variation of this new rule is likely to be approved by the SEC.