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SEC Approves FINRA Amendments to Corporate Financing and Conflicts of Interest Rules
Practical Law Legal Update 8-566-6866 (Approx. 3 pages)
SEC Approves FINRA Amendments to Corporate Financing and Conflicts of Interest Rules
by Practical Law Corporate & Securities
| Published on 30 Apr 2014 • USA (National/Federal) |
The SEC approved amendments to FINRA Rule 5110, Corporate Financing Rule - Underwriting Terms and Arrangements, and FINRA Rule 5121, Public Offerings of Securities with Conflicts of Interest.
FINRA Rule 5110 generally regulates underwriting compensation and prohibits unfair arrangements in connection with public offerings. Among other things, it requires member firms to file with FINRA information about the public offerings in which they participate and to disclose affiliations and other relationships that may indicate the existence of conflicts of interest. FINRA Rule 5121 generally provides that members with a conflict of interest may not participate in a public offering unless they make certain disclosures and comply with other requirements.
The amendments to FINRA Rule 5110:
- Narrow the scope of the definition of "participation or participating in a public offering."
- Modify the lock-up restrictions to exclude certain securities acquired or converted to prevent dilution.
- Clarify that the information requirements apply only to relationships with a "participating" member.
The amendments to FINRA Rule 5121 narrow the scope of the definition of "control" in Rule 5121(f)(6).
The amendments take effect on May 28, 2014.
For a complete summary of the amendments, see Legal Update, FINRA Proposes Amendments to Corporate Financing and Conflicts of Interest Rules.
To learn more about the role of FINRA in registered securities offerings, see Practice Note, FINRA and Securities Offerings: The Road to No Objections.