FINRA Implements Enhancements to its Public Offering Review Program | Practical Law

FINRA Implements Enhancements to its Public Offering Review Program | Practical Law

FINRA implemented enhancements to its public offering review program, including adding an immediate clearance procedure for certain shelf offerings and an option for certain non-shelf offerings to request limited review.

FINRA Implements Enhancements to its Public Offering Review Program

Practical Law Legal Update 9-544-6765 (Approx. 3 pages)

FINRA Implements Enhancements to its Public Offering Review Program

by Practical Law Corporate & Securities
Published on 07 Oct 2013 • USA (National/Federal)
FINRA implemented enhancements to its public offering review program, including adding an immediate clearance procedure for certain shelf offerings and an option for certain non-shelf offerings to request limited review.
On September 30, 2013, FINRA implemented enhancements to its public offering review program. The enhancements, which are described in this guide, include the introduction of:
  • A procedure for certain shelf offerings to obtain immediate FINRA clearance, even outside of business hours.
  • An option for certain non-shelf offerings of exchange-listed securities to request to be reviewed on a limited basis.
In an enhancement to the same-day clearance procedure FINRA introduced in 2010, the immediate clearance process allows filings for certain shelf offerings to obtain clearance immediately, 24 hours per day, seven days a week. Immediate clearance is available for filings of new shelf registration statements (which FINRA calls "base" filings) or filings made for shelf takedowns. To obtain immediate clearance, a filer must:
  • Make the representations required by the existing same-day clearance procedure (these cover, among other things, the absence of prohibited arrangements, the adequacy of disclosure about underwriting compensation and compliance with FINRA Rule 5121).
  • Undertake to provide all information necessary to complete the filing within three business days.
  • Provide the Fedwire number for the payment of the filing fee (generally, this is not required for takedowns since fees are paid in conjunction with the base filing).
FINRA staff review these representations after granting immediate clearance. Notably, filers can still clear their offerings through the same-day clearance procedure.
Under the limited review option, non-shelf offerings can request a limited review if they meet the following requirements:
  • The securities are listed on a national securities exchange.
  • The offering is being distributed on a firm commitment or straight best efforts basis.
  • The total underwriting compensation is within allowable limits and does not include securities.
  • The offering does not include prohibited arrangements.
  • The FINRA member firms involved are identified in the offering document and in the FINRA filing.
  • The offering is filed with the SEC.
  • The offering does not involve a new or novel product or one that poses complex regulatory issues.
A filer must also make six representations as part of its request for limited review, although some of them may be deferred past the first FINRA filing.
FINRA also posted a new document containing public offering system filing tips.
FINRA's Corporate Financing Department administers rules intended to ensure that underwriting terms or arrangements are not unfair or unreasonable. Securities offerings that are not exempt from filing with FINRA, such as IPOs, cannot proceed until the Corporate Financing Department confirms it has "no objections" to the offering's underwriting arrangements following successful completion of the FINRA filing and review process.
For more information on the process of clearing a public offering with FINRA, see Practice Note, FINRA and Securities Offerings: The Road to No Objections.