FINRA Revised Rule 5122

As per revised FINRA Rule 5122, a FINRA member who is involved in a private placement of unregistered securities is required to agree that atleast 85% of the offering proceeds must be engaged for the business operations identified in the "intended use of the offering proceeds" disclosure section in the Private Placement Memorandum and such proceeds will not be utilized for paying the offering costs, discounts, commissions or any other cash or non-cash sales incentives.

The revised rule also requires disclosures to investors in a private placement memorandum, term sheet or other offering document of the intended use of offering proceeds, the offering expenses and the amount of compensation that will be paid to the broker-dealer and its associated persons. The rule also requires the filing of Private Placement Memorandum and amendments thereto with FINRA.

The rule 5122 will have serious consequences for private placements as it will apply to almost all private placements (except those which are exempted). The revised rule is expected to prevent the investors against fraud and abuse, by altering the manner and business practices in which FINRA member firms conduct and price private placements.

Welcome To Princeton Corporate Solutions About FINRA

Welcome Readers,

Thanks for visiting and participating in Princeton Corporate Solutions' Blog centered around FINRA.  In this blog you will find out background information about FINRA in addition to Regulatory Changes and how they effect investment and businesses of many different sizes across multiple verticals.

This is an interactive blog, as such we encourage our readers to comment, leave suggestions and of course questions. We look forward to continuing our discussion on this subject.

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What is FINRA?

As defined by FINRA, "The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA's mission is to protect America's investors by making sure the securities industry operates fairly and honestly. All told, FINRA oversees about 4,275 brokerage firms, about 161,550 branch offices and approximately 629,980 registered securities representatives.

FINRA has approximately 3,440 employees and operates from Washington, DC, and New York, NY, with 20 regional offices around the country."