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Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices
associated persons away from their firm.
The proposed changes to the Filer Form would ask if your firm is filing an offering that your associated person is selling in a private securities transaction subject to FINRA Rule 3280.23 The member may respond yes, no or unknown.

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Information Clarification and Accuracy Improvement Finally, FINRA proposes minor changes to three existing questions in the Offering Information section of the Filer Form in order to clarify the information requested and improve the accuracy of responses. The first proposed change is to the current questions concerning the members date of first sale or offer, which FINRA relies upon to assess the timeliness of the filings. For Rule 5123 filings, the current Filer Form requests that the member provide the date of its first sale in the offering by way of a calendar box or respond unknown, and separately instructs the member to check a box if sales have yet to commence. These questions would be replaced with Has your firm commenced sales of the offering? The member may respond yes, no, or unknown. If the member has answered yes that it commenced sales, the Filer Form would request that the member enter the date of first sale or respond unknown.
Likewise, for Rule 5122 filings, the current Filer Form requests that the member provide the date of first offer by way of a calendar box or respond unknown, and separately instructs the member to check a box if sales have yet to commence. These questions would be replaced with Has your firm made any offers for the private placement or otherwise provided the offering documents to any investor? As with the Rule 5123 filings, the member may respond yes, no, or unknown. If the member has answered yes, the Filer Form would request the member enter the date of first offer or provision of offering documents to any investor or respond unknown.
Second, the proposed changes to the Offering Information section would update the options that a member may select when answering what exemption 23 FINRA Rule 3280 Private Securities Transactions of an Associated Person requires, prior to participating in any private securities transaction, an associated person to provide written notice to the member with which he is associated describing in detail the proposed transaction and the persons proposed role therein, including if compensation will be received. In the case of a transaction in which the associated person may receive selling compensation, that transaction must be approved in writing by the member.

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from registration the issuer is relying upon. The current question allows the member to select Rule 505. Rule 505
was repealed in 2016 and is no longer an available exemption; therefore, the Filer Form would remove that option.24
Third, the proposed changes to the Filer Form would amend the process by which the member uploads offering documents that it used in connection with the sale of the offering. For each document the member uploads, the Filer Form would request that the member identify the type of document by selecting an option from a drop down box e.g., private placement memorandum or term sheet with an option to identify the document as other and the option to select multiple types of documents e.g., indicate that the document is a term sheet and a private placement memorandum.
Conclusion As noted above, the proposed revisions to the Filer Form would assist FINRA in fulfilling its regulatory responsibilities by improving the quality of information that is filed with it about the private placement and the members role in offering the securities.
Specifically, FINRA proposes to clarify questions that may have been unclear to members, and add other questions that, with the benefit of experience, FINRA
believes would help it better understand the issues and potential risks associated with a private placement e.g., an offering with an unmet contingency, an issuer with disciplinary history or associated persons selling private offerings away from their firms. In addition, the proposed new questions should in many cases obviate the need for follow-up questions after filing and would therefore streamline the existing information collection procedure that FINRA relies on to fulfil its regulatory responsibilities related to private placements.
FINRA has filed the proposed changes for immediate effectiveness. FINRA
anticipates that the implementation date will be May 22, 2021.
2. Statutory Basis FINRA believes that the proposed changes to the Filer Form are consistent with the provisions of Section 15Ab6
of the Act,25 which requires, among other things, that FINRA rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of 24 See Securities Act Release No. 10238 October 26, 2016, 81 FR 83494 November 21, 2016.
25 15 U.S.C. 78o3b6.

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trade, and, in general, to protect investors and the public interest, in that it will assist in FINRAs efforts to detect and prevent fraud in connection with specified private placements. In addition, the proposed changes would assist FINRA in evaluating the specified private placement activities of members and assess whether members are conducting a reasonable investigation and whether members are complying with private placement obligations including regarding contingency offerings for private placement offerings in which they participate.
B. Self-Regulatory Organizations Statement on Burden on Competition Economic Impact Assessment FINRA has undertaken an economic impact assessment, as set forth below, to analyze the regulatory need for the proposed changes, their potential economic impacts, including anticipated costs, benefits, and competitive effects, relative to the current baseline, and the alternatives FINRA considered in assessing how best to meet FINRAs regulatory objectives.
Regulatory Need The proposed Filer Form changes are intended to streamline the existing information collection procedure in fulfilling FINRAs regulatory responsibility related to private placements. In particular, in connection with its review of submitted Filer Forms, FINRA spends significant time and resources in making follow-up inquiries to members in areas of heightened concern, including terms of contingency offerings, disciplinary history, and use of proceeds after members submit the Filer Form.
Constraints of regulatory resources in this process may lead to unnecessary or prolonged reviews and investigations, thereby imposing extra costs and regulatory uncertainty for members.26
These constraints may even hinder FINRAs ability to detect fraudulent acts and practices in an accurate and timely manner.
Economic Baseline The economic baseline for the proposed changes is the current Filer Form under FINRA Rules 5122 and 5123, and FINRAs existing private placement regulatory procedure. FINRA
has collected information detailing 26 The private placement filing requirement is a notice filing only and members do not wait for approval from FINRA in connection with a private placement. If FINRA asks questions of the member in response to its filing, the member may become concerned that there may be a potential compliance issue with the private placement.

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