SEC Approves FINRA Private Placement Rule: New Filing Requirements for FINRA Members

On June 7, 2012, the SEC approved FINRA Rule 5123.[1] The new rule requires a FINRA member firm that sells private placement interests either to file copies of any offering documents used in connection with certain types of private placements or to indicate that it did not use any such offering documents.[2] Rule 5123(b) exempts certain private placements; for example, private placements sold solely to qualified purchasers, institutional purchasers and other sophisticated investors, including accredited investors as defined under Rule 501(a)(1), (2), (3) or (7) of the Securities Act of 1933, are exempt from the new filing requirements.[3] Firms that are required to comply with Rule 5123 must file copies of any private placement memorandum, term sheet or other offering document, including any materially amended versions thereof, used in connection with such sale within fifteen (15) calendar days of the first sale, or to indicate to FINRA that no such offering documents were used. All relevant documents must be electronically filed with FINRA through the FINRA Firm Gateway, an online compliance tool that provides access to applications to FINRA members. The rule becomes effective on December 3, 2012 and applies to non-exempt private placements that begin selling efforts on or after that date. [4]

FINRA will continue to afford confidential treatment to all documents and information filed pursuant to Rule 5123 and will use these materials only for the purpose of determining compliance with FINRA rules or other regulatory purposes.[5]

[1] See Securities and Exchange Commission Release No. 34-67157 (June 7, 2012). [2] See Securities and Exchange Commission Release No. 34-67157 (June 7, 2012) (Notice of Filing of Amendments No. 2 and No. 3 and Order Granting Accelerated Approval of File No. SR-FINRA-2011-057). [3] See FINRA Rule 5123(b)(1)(J). [4] See FINRA Regulatory Notice 12-40. [5] Id.

For further information, please contact: Daniel G. Viola, Partner 212.573.8038 or

Cheryl Spratt