SEC Approves FINRA Rule 5122 re Private Placements of Securities Issued by Members

The SEC approved FINRA's proposal to adopt new FINRA Rule 5122, that will require a member offering or selling any security in a private placement issued by the member or a "control entity" to:

(1) disclose to investors in a private placement memorandum, term sheet or other offering document the intended use of offering proceeds and the offering expenses;

(2) file the offering document with FINRA; and

(3) commit that at least 85% of the offering proceeds will be used for business purposes, that will not include offering costs, discounts, commissions and any other cash or non-cash sales incentives.

FINRA Rule 5122 will take effect 30 days following publication of a FINRA Regulatory Notice announcing the date, with the notice to be published no later than 60 days following SEC approval.

For the text of FINRA Rule 5122, please see here.