Effective December 3, 2012, FINRA Rule 5123 requires broker-dealers to file certain documents related to the sale of private placements with FINRA.
According to the rule, documents that must be filed include a copy of any private placement memorandum, term sheet or other offering document, including any materially amended versions thereof, used in connection with such sale. The documents must be filed within 15 calendar days of the date of first sale.
A number of private placements are exempt from the requirements of the Rule. Exemptions include, but are not limited to sales to certain:
- institutional accounts
- qualified purchasers
- qualified institutional buyers
- investment companies
- an entity composed exclusively of qualified institutional buyers
- employees and affiliates
- knowledgeable employees
- eligible contract participants
- accredited investors
In addition to the list of exemptions, FINRA may exercise its power to exempt a member or association person from the provisions of the Rule for good cause shown, according to the Rule 9600 Series.
FINRA is required to maintain confidential treatment to all documents and information filed in to the Rule.
FINRA has also published Frequently Asked Questions (“FAQ”) to provide guidance to broker-dealers and registered representatives regarding Rule 5123.
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