Private Placement Filing Requirement for Broker-Dealers – New FINRA Rule 5123

As of December 3, 2012, some broker-dealers now have to file certain documents with FINRA relating to the sale of private placements. Among the documents that must be filed, if no exception is applicable, are private placement memoranda, term sheets and other offering documents concerning non-publicly offered investments. Thankfully, a number of exceptions apply including sales to:

1)      Certain but not all “accredited investors; “

2)      “Institutional Accounts;” and

3)       “Qualified Institutional Buyers.”

Firms that sell such privately offered securities to those type investors need not file anything with FINRA. If required, such filings must be filed through the “Firm Gateway.” Among the more salient points of FINRA Rule 5123 and the accompanying release are:

  • The required filings are so called “notice filings,” which do not trigger any clearance type correspondence;
  • Required filings must be made within fifteen (15) calendar days of the first sale of the privately offered securities;
  • The .pdf documents filed must be “in a searchable format;”
  • Only one firm need make the filing even if multiple firms are selling the offering;
  • If material amendments are made to the documents enumerated above, then those must be submitted to FINRA as well; and
  • Confidential treatment of the filings is available but must be requested in advance.

Are you unclear about how to comply with the new rule? Need guidance on the exemptions to the new rule’s application? We are here to assist you with the foregoing.


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