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Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 2,353 private placement filings submitted by 394 members with initial filing dates between May 1, 2019 and May 1, 2020. The average maximum number of filings per member is 6 157
during the period.27 Of the 2,353 filings, 48% provided yes answers to at least one of the three existing questions identifying whether the filing relates to a contingency offering; whether the issuer, its principals or related parties have disciplinary histories; and whether offering proceeds may be used by the issuer or related parties for certain identified purposes.28
According to the current regulatory procedure, FINRA reviews the information provided in the Filer Form along with other data to determine the risk profile of a private placement through its triage program. In the case in which an offering receives a high-risk assessment, FINRA initiates a further review and gathers details about the private placement. FINRA also frequently conducts informational inquiries to members if a review raises further concern and leads to a FINRA
investigation. Because of the time and resources needed to respond, these regulatory inquiries can be costly to members. These inquiries also tend to require significant regulatory resources, cause delays in FINRA reviews and investigations, and impose extra communication costs and regulatory uncertainty on members after the filing process.
Economic Impacts
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The proposal would add questions in the Filer Form with the option to answer unknown pertaining to the issues of heightened concern including contingency offerings, disciplinary history, use of proceeds, and private offerings sold by associated persons away from their firms.29 In cases where members choose to provide additional information, the further questions or requests for information at the outset would shift the responsibility of information collection on the key issues from FINRA after the filing to these members upon filing. FINRA believes that these members already know the requested information and accordingly would have no increases in relevant costs of information collection or would 27 Among
the filing members, 70% of them are frequent filers who had also filed at least one private placement filing during the period of May 1, 2018 and May 1, 2019.
28 The rest of the filings provided either no or unknown answers to these questions.
29 As mentioned earlier, the proposal would also make minor changes to clarify existing questions and improve the accuracy of responses in the Filer Form.

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face relatively low costs of information collection if they do not already know the requested information and perform additional investigation to determine it, instead of answering unknown.
Subsequent regulatory inquiries to obtain such information based on the existing Filer Form, in comparison, could require significant FINRA
resources and impose higher costs and regulatory uncertainty on these members. The proposal could therefore reduce information collection costs as a whole for FINRA and members by avoiding regulatory inquiries to obtain the information requested in the new proposed questions, and thereby streamlining the regulatory process.
The proposal would also help FINRA
better understand the scope and severity of existing high-risk matters in private placements. By allowing access to additional information in areas of heightened concern, the proposal would assist FINRA in refining its triage program, thereby extending its ability to assess risk profiles and detect fraudulent and manipulative acts and practices in these areas. FINRA believes that members may likely benefit from fewer unnecessary reviews and shortened review and investigation cycles due to a streamlined regulatory process and enhanced regulatory insights. The proposals benefits, however, may vary depending on how frequently additional information is provided rather than unknown responses to the new questions in the Filer Form following the proposal.
The proposed amendments could minimally increase the costs of collecting and providing additional information for members who answer yes to one of the three existing questions regarding contingency offerings, the disciplinary history of the issuer, its principals and related parties, and the use of proceeds. FINRA believes that this cost increase to members, however, is relatively low overall compared with the benefit they would receive from reduced regulatory communication costs and uncertainty.
In addition, members that would choose to provide unknown answers to each new question would not be subject to such a cost increase. FINRA does not expect cost increases will deter member entry to the industry or private placement offerings or result in any significant burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act.
Alternatives Considered An alternative considered by FINRA
was to prohibit unknown responses in the Filer Form. This alternative may
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lead to greater benefit, for example, from efficiencies in regulatory procedure and enhanced regulatory insights into highrisk matters. However, FINRA believes that the alternative would pose higher information collection costs on members. The proposal, therefore, permits unknown responses.
Members may, however, choose to expend effort and incur associated costs with collecting and reporting additional information.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: i Significantly affect the protection of investors or the public interest; ii impose any significant burden on competition; and iii become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19b3A of the Act 30 and Rule 19b 4f6 thereunder.31
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments Use the Commissions internet comment form http www.sec.gov/
rules/sro.shtml; or Send an email to rule-comments@
sec.gov. Please include File Number SR
FINRA2021002 on the subject line.
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