FINRA Issues Proposed Amendments to its Corporate Financing Rule | Practical Law

FINRA Issues Proposed Amendments to its Corporate Financing Rule | Practical Law

FINRA requested comments on proposed amendments to FINRA Rule 5110, its corporate financing rule.

FINRA Issues Proposed Amendments to its Corporate Financing Rule

Practical Law Legal Update 7-519-7842 (Approx. 2 pages)

FINRA Issues Proposed Amendments to its Corporate Financing Rule

by PLC Corporate & Securities
Published on 07 Jun 2012 • USA (National/Federal)
FINRA requested comments on proposed amendments to FINRA Rule 5110, its corporate financing rule.
On June 6, 2012, FINRA proposed amendments to FINRA Rule 5110, its corporate financing rule, to permit additional deferred compensation arrangements in public offerings. Under the amended rule, termination fees and rights of first refusal (ROFRs) in engagement letters for underwriting and financial advisory services in connection with public offerings would be permitted if all of the following conditions are satisfied:
  • The amount of the termination fee is reasonable in relation to the services contemplated in the agreement and fees arising from services provided under an ROFR is customary for those types of services.
  • The issuer has a right of termination for cause, which includes the FINRA member's material failure to provide the services contemplated in the agreement.
  • An issuer's termination for cause eliminates any obligations respecting any termination fee or ROFR.
In addition, the proposed amendments would:
  • Exempt from the filing requirement offerings of securities issued by exchange traded funds (ETFs) structured as Delaware statutory or grantor trusts. This change would treat these ETFs consistently with other types of ETFs that do not have a filing requirement.
  • Make certain procedural amendments to reflect, among other things, the acceptance of electronic filings.
Comments on the proposed rule will be accepted until July 23, 2012.