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FINRA Updates Private Placement Filing Requirements FAQs

Posted in Private Placements

FINRA recently posted two updates to its Private Placement Filing Requirements FAQs. http://www.finra.org/Industry/Compliance/RegulatoryFilings/PrivatePlacements/FAQ/index.htm?utm_source=MM&utm_medium=email&utm_campaign=Weekly_Update_012313_FINAL#1-4.

In the first update, FINRA clarified that the Rule 5123 filing obligation applies to private placements to any individual accredited investor, which includes officers, directors and general partners of the issuer (Rule 510(a)(4)) and entities in which all the equity owners are individual accredited investors  (Rule 501(a)(8)).

In the other update, it stated that private placements sold solely to accredited investors that satisfy the Regulation D four categories of accredited investors that are not natural persons (Rule 501(a)(1), (2), (3) and (7) are exempt from the Rule 5123 filing requirements.  Those categories include the following:

  • a bank, insurance company, registered investment company, employee benefit plan or small business investment company;
  • a private business development company;
  • a charitable organization, corporation or partnership with assets exceeding $5 million; or
  • a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.