Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 8819 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 89027 

(June 8, 2020), 85 FR 35962. Comments on the 

proposed rule change can be found at: https://

www.sec.gov/comments/sr-nasdaq-2020-027/ 

srnasdaq2020027.htm. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 89358, 

85 FR 45275 (July 27, 2020). The Commission 

designated September 10, 2020, as the date by 

which the Commission shall approve or disapprove, 

or institute proceedings to determine whether to 

approve or disapprove, the proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7See Securities Exchange Act Release No. 89799, 

85 FR 57282 (September 15, 2020). 

8See Securities Exchange Act Release No. 90559, 

85 FR 79249 (December 9, 2020). 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b-4(f)(6). Rule 19b–4(f)(6)(iii) 

requires a self-regulatory organization to give the 

Commission written notice of its intent to file the 

proposed rule change, along with a brief description 

and text of the proposed rule change, at least five 

business days prior to the date of filing of the 

proposed rule change, or such shorter time as 

designated by the Commission. FINRA has satisfied 

this requirement. 

4Both Rules 5122 and 5123 provide exemptions 

from the filing requirement when certain types of 

securities are sold or securities are sold to certain 

types of investors. See Rules 5122(c) and 5123(b). 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSE–2021–09, and 

should be submitted on or before March 

2, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02589 Filed 2–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91055; File No. SR– 

NASDAQ–2020–027] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Withdrawal of Proposed Rule Change 

To Apply Additional Initial Listing 

Criteria for Companies Primarily 

Operating in Restrictive Markets 

February 3, 2021. 

On May 29, 2020, The Nasdaq Stock 

Market LLC (‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

apply additional initial listing criteria 

for companies primarily operating in a 

jurisdiction that has secrecy laws, 

blocking statutes, national security laws 

or other laws or regulations restricting 

access to information by regulators of 

U.S.-listed companies in such 

jurisdiction. The proposed rule change 

was published for comment in the 

Federal Register on June 12, 2020.3

On July 21, 2020, pursuant to Section 

19(b)(2) of the Act,4 the Commission 

designated a longer period within which 

to approve the proposed rule change, 

disapprove the proposed rule change, or 

institute proceedings to determine 

whether to disapprove the proposed 

rule change.5 On September 9, 2020, the 

Commission instituted proceedings 

under Section 19(b)(2)(B) of the Act 6 to 

determine whether to approve or 

disapprove the proposed rule change.7

On December 3, 2020, the Commission 

extended the period for consideration of 

the proposed rule change to February 7, 

2021.8

On February 1, 2021, the Exchange 

withdrew the proposed rule change 

(SR–NASDAQ–2020–027). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02593 Filed 2–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91047; File No. SR–FINRA– 

2021–002] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the Private 

Placement Filer Form Under FINRA 

Rules 5122 and 5123 

February 3, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

27, 2021, the Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by FINRA. FINRA 

has designated the proposed rule change 

as constituting a ‘‘non-controversial’’ 

rule change under paragraph (f)(6) of 

Rule 19b–4 under the Act,3 which 

renders the proposal effective upon 

receipt of this filing by the Commission. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing changes to the 

Private Placement Filer Form (‘‘Filer 

Form’’) that members complete when 

submitting private placement filings 

under FINRA Rules 5122 (Private 

Placements of Securities Issued by 

Members) or 5123 (Private Placements 

of Securities). The proposal does not 

make any changes to the text of FINRA 

rules. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Rules 5122 and 5123 require a FINRA 

member to file information regarding 

private placements in which the 

member participates.4 When Rule 5123 


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8820 Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 

5See Securities Exchange Act Release No. 67157 

(June 7, 2012), 77 FR 35457 (June 13, 2012) (Notice 

of Filing of Amendments No. 2 and No. 3 and Order 

Granting Accelerated Approval of File No. SR– 

FINRA–2011–057); Regulatory Notice 12–40 

(September 2012). 

6See Regulatory Notice 12–40 (September 2012). 

See also Regulatory Notice 13–26 (August 2013); 

Securities Exchange Act Release No. 69843 (June 

25, 2013), 78 FR 39367 (July 1, 2013) (Notice of 

Filing and Immediate Effectiveness of a Proposed 

Rule Change Relating to Members’ Filing 

Obligations Under FINRA Rule 5123 (Private 

Placements of Securities) File No. SR–FINRA– 

2013–026). 

7FINRA Gateway is an online compliance tool 

that provides consolidated access to FINRA 

applications and allows members to submit 

required filings electronically to meet their 

compliance and regulatory obligations. 

8See Regulatory Notice 13–26 (August 2013) and 

Securities Exchange Act Release No. 69843 (June 

25, 2013), 78 FR 39367 (July 1, 2013) (Notice of 

Filing and Immediate Effectiveness of a Proposed 

Rule Change Relating to Members’ Filing 

Obligations Under FINRA Rule 5123 (Private 

Placements of Securities) File No. SR–FINRA– 

2013–026). 

9See Regulatory Notice 17–17 (April 2017) and 

Securities Exchange Act Release No. 80321 (March 

28, 2017), 82 FR 16245 (April 3, 2017) (Notice of 

Filing and Immediate Effectiveness of a Proposed 

Rule Change Relating to the Private Placement Filer 

Form Under FINRA Rules 5122 and 5123 File No. 

SR–FINRA–2017–008). 

10FINRA staff also monitor SEC and FINRA 

disciplinary actions involving private placements. 

This monitoring enables FINRA to identify issues 

that frequently occur in private placements. 

11The scope of a member’s obligations to conduct 

a reasonable investigation of a private placement is 

addressed in Regulatory Notice 10–22 (April 2010). 

FINRA Rules 5122 and 5123 and the Filer Form do 

not impose any additional requirement of 

reasonable investigation beyond what is discussed 

in that Notice. 

12FINRA has found that members failed to 

safeguard investor funds in offerings that were 

subject to certain conditions to close or failed to 

return funds to investors as required when the 

issuer made material changes to the terms of the 

contingency or offering. See, e.g., McDonald 

Partners LLC, FINRA AWC No. 2015043649601 

(February 21, 2018); Financial America Securities, 

Inc., FINRA AWC No. 2014042711601 (May 26, 

2016); Dawson James Securities, Inc., FINRA AWC 

No. 2015044393901 (February 07, 2017); TerraNova 

Capital Equities, Inc., FINRA AWC No. 

2015047958301 (December 21, 2017). 

13 In recent cases, including those involving 

fraud, FINRA has found that members did not meet 

their obligation to conduct a reasonable 

investigation of the offering when they failed to 

identify or follow up on areas of heightened 

concern regarding the background of the issuer, its 

principals, or related parties. See, e.g., First 

American Securities, Inc., FINRA AWC No. 

2015046056405 (November 7, 2016); Richard 

Gomez, FINRA NAC Decision No. 2011030293503 

(March 28, 2018); Carolina Financial Securities, 

LLC and Bruce V. Roberts, FINRA OHO Decision 

No. 2014040295201 (May 26, 2017). 

14 In recent cases, including those involving 

fraud, FINRA has found that members did not meet 

their obligation to conduct a reasonable 

investigation of the offering when they failed to 

review or follow up on areas of heightened concern 

regarding related party transactions or the issuer’s 

intended use of proceeds. See, e.g., Harold Lee 

Connell, FINRA AWC No. 2016051493702 (June 12, 

2018); Carolina Financial Securities, LLC and Bruce 

V. Roberts, FINRA OHO Decision No. 

2014040295201 (May 26, 2017); Bridge Capital 

Associates, Inc., FINRA AWC No. 2014039283801 

(December 12, 2016). 

15See, e.g., First American Securities, Inc., FINRA 

AWC No. 2015046056405 (November 7, 2016); 

Richard Gomez, FINRA NAC Decision No. 

2011030293503 (March 28, 2018); Ahmed Ghassan 

Gheith, FINRA AWC No. 2016052540603 (April 24, 

2018); Brandon D. Gioffre, FINRA AWC No. 

2015046448701 (June 23, 2016). 

became effective on December 3, 2012,5

FINRA required members to use the 

Filer Form for filings under both rules.6

Members submit the Filer Form and 

relevant offering documents to FINRA 

through the FINRA Gateway.7 On July 1, 

2013, FINRA amended Rule 5123 to 

require members to file the requisite 

information ‘‘in a manner prescribed by 

FINRA’’ and also began using an 

updated version of the Filer Form.8 On 

May 22, 2017, FINRA began using a 

further updated Filer Form.9 The 

changes proposed herein would update 

the version of the Filer Form that has 

been in use since May 2017 for filings 

made pursuant to Rule 5122 and Rule 

5123. 

The proposed changes would 

represent the fourth version of the Filer 

Form since Rule 5123 became effective 

in 2012. Updates 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 member’s 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. 

The Filer Form has three main 

components: (1) The ‘‘Participating 

Member Information’’ section, which 

seeks information about the members 

that are selling the private placement; 

(2) the ‘‘Issuer Information’’ section, 

which captures basic information about 

the issuer; and (3) the ‘‘Offering 

Information’’ section, which seeks 

information about the offering.10

FINRA proposes changes to the Filer 

Form that would add or clarify 

questions or other information 

requested in the Offering Information 

section. The benefit to members and 

FINRA would be twofold. When a 

FINRA review of the submitted Filer 

Form identifies a potential concern or a 

need for additional information, it 

typically leads to follow-up questions 

by FINRA staff. These inquiries absorb 

members’ and FINRA’s resources. The 

proposed changes to the Filer Form 

would provide more focused and 

complete information that, in many 

cases, would obviate the need for these 

follow-up inquiries. In addition, the 

proposed changes would enable FINRA 

to get better information about those 

issues in private placement transactions 

that have presented the most risk in 

disciplinary cases. 

The proposed changes address three 

key categories of offering information 

that can benefit from more focused or 

complete information in the Offering 

Information section of the Filer Form: (i) 

Contingency offerings; (ii) the 

disciplinary history of the issuer, its 

principals and related parties; and (iii) 

the use of proceeds. 

FINRA also proposes to add a new 

question regarding FINRA Rule 3280 

(Private Securities Transactions of an 

Associated Person). In addition, FINRA 

proposes updates to existing questions 

regarding the member’s date of first sale 

or offer, the Securities Act registration 

exemptions that apply and what type of 

documents are being filed with FINRA. 

The Filer Form does not set standards 

of disclosure or information gathering 

requirements for members that 

participate in private placements.11

Rather, the information provided by 

members on the Filer Form assists 

FINRA in focusing its review on the 

areas of heightened concern in the 

private placement market. Based on a 

review of private placement 

enforcement actions from 2016 to 2018, 

FINRA found frequent violations 

resulting from improper contingency 

arrangements,12 inadequate 

investigations concerning disciplinary 

history 13 and the issuer’s intended use 

of proceeds,14 and private offerings sold 

by associated persons away from their 

firm without proper authorization and 

oversight.15

The proposed Filer Form changes 

would help address these concerns and 

streamline the existing information 

collection procedure that FINRA relies 

on to fulfill its regulatory responsibility 

related to private placements. 

The questions in the Offering 

Information section of the Filer Form 

can generally be answered either by: (i) 

Inputting requested information or 

responding ‘‘unknown’’; or (ii) checking 

one of three ‘‘radio buttons’’ for ‘‘yes,’’ 

‘‘no,’’ or ‘‘unknown.’’ The proposed 

changes to the Filer Form would not 

alter this general approach. Members 

would continue to have the option to 

respond ‘‘unknown’’ to each proposed 

new or revised question or request for 

information. Therefore, the Filer Form, 

as proposed to be modified, would not 

impose any new obligation on members 

to seek out information that they do not 


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Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 8821 

16The Filer Form provides that the member 

submitting the filing must answer the questions 

‘‘[b]ased on the information contained in the 

offering document (or if otherwise known by your 

firm).’’ 

17For purposes of the Filer Form, a contingency 

offering is a private placement in which the closing 

or sale of securities in the private placement is 

contingent on an event or condition, typically the 

receipt of orders for a minimum aggregate dollar 

amount or number of securities by an expiration 

date. Members participating in contingency 

offerings must understand and comply with the 

requirements of SEA Rules 10b–9 and 15c2–4. See 

Private Placement FAQ #1 under the heading 

‘‘Filing Form’’ available on the finra.org website. 

18See Regulatory Notice 16–08 (February 2016). 

FINRA’s review of securities offering documents 

has revealed instances in which broker-dealers have 

not complied with the contingency offering 

requirements of SEA Rules 10b–9 and 15c2–4. In 

the Notice, FINRA provided guidance regarding the 

requirements of SEA Rules 10b–9 and 15c2–4 and 

reminded broker-dealers of their responsibility to 

have procedures reasonably designed to achieve 

compliance with these rules. 

19As noted, the member submitting the Filer 

Form must answer the questions ‘‘[b]ased on the 

information contained in the offering document (or 

if otherwise known by your firm).’’ The member 

may provide further information in the free text box 

at the end of the Filer Form. 

20Rule 15c2–4 requires that upon receiving 

money or other consideration from an investor in 

a contingency offering, a broker-dealer must 

promptly either (1) deposit those funds into ‘‘a 

separate bank account’’ for which the broker-dealer 

is the account holder and is designated as agent or 

trustee; or (2) transmit those funds to a bank that 

has agreed in writing to act as the escrow agent for 

the offering. 

21Using the ‘‘CRD lookup’’ function, the member 

selects whether the subject is an individual or 

entity, then enters either the name or CRD number 

and selects the appropriate result to generate the 

name and CRD number in the Filer Form. 

22The replacement of ‘‘able to use’’ with ‘‘intends 

to use’’ is meant to clarify the question, which seeks 

information about the member’s understanding of 

the issuer’s intended use of proceeds. It would not 

constitute a substantive change to the information 

required by the Filer Form. 

already have.16 FINRA also notes that 

the Filer Form provides (and would 

continue to provide) a free text box at 

the end of the form for members that 

wish to clarify their answers or add 

other relevant information with regard 

to particular questions or requests for 

information. 

Contingency Offerings 

The proposed changes to the Offering 

Information section would add and 

clarify several questions regarding 

contingency offerings; 17 FINRA 

continues to observe numerous 

instances of non-compliance with this 

type of offering.18 The Filer Form today 

asks if the contingency has been met at 

the time of filing. The proposed changes 

to the Filer Form would add three 

additional questions/requests if the 

offering is a contingency offering, each 

with the option to respond ‘‘unknown’’: 

(1) A request for the member to provide 

the date by which the contingency must 

be met; (2) a question asking if there 

have been any changes to the original 

terms of the contingency during the 

course of the offering (e.g., extension of 

the date by which the contingency must 

be met); 19 and (3) a question regarding 

whether ‘‘the subscription process 

involves your firm receiving or 

transmitting investor funds in the 

offering’’. This last question would 

provide FINRA with transparency 

regarding whether the broker-dealer is 

subject to the requirements for handling 

funds under SEA Rule 15c2–4.20 If the 

member responds ‘‘yes’’ to this last 

question, the Filer Form would ask if 

‘‘your firm is acting as the agent or 

trustee for investor funds until the 

contingency is met.’’ The terms ‘‘agent 

or trustee’’ are used in SEA Rule 15c2– 

4, which governs the manner in which 

a member must handle investors’ funds 

in a contingency offering. If the member 

responds ‘‘yes’’ or ‘‘unknown’’ there 

would be no more questions. If the 

member responds ‘‘no,’’ the Filer Form 

would require the member to provide 

the name of the escrow agent in a free 

text box or respond ‘‘unknown.’’ 

Disciplinary History 

The Offering Information section also 

would be revised to add questions 

regarding disciplinary history. 

Currently, the Filer Form asks whether 

the issuer, any officer, director or 

executive management of the issuer, 

sponsor, general partner, manager, 

advisor, or any of the issuer’s affiliates 

has been the subject of SEC, FINRA or 

state disciplinary actions or proceedings 

or criminal complaints within the last 

10 years. The proposed revisions to the 

Filer Form would change the current 

question to also inquire about ‘‘other 

federal agency’’ disciplinary actions (in 

addition to SEC, FINRA and state 

disciplinary actions or proceedings or 

criminal complaints) within the last 10 

years. If the member responds ‘‘yes’’ to 

the revised question, the Filer Form 

would request the identification of the 

individual or entity that was the subject 

of such action or allow the member to 

respond ‘‘unknown.’’ For each 

identified entry, the proposed revisions 

to the Filer Form would first ask 

whether the individual or entity has 

registration records in the Central 

Registration Depository (‘‘CRD®’’). If the 

member responds ‘‘yes’’ to the CRD 

question, then the member would enter 

the name of the individual or entity 

with no more questions.21 If instead the 

member responds ‘‘no’’ or ‘‘unknown’’ 

to the CRD question, the Filer Form 

would request that the member provide 

the name of the individual or entity 

with the disciplinary history or respond 

‘‘unknown.’’ If the member provides the 

name of the entity or individual with 

the disciplinary history, the Filer Form’s 

next requests would be for three pieces 

of information, each of which includes 

the option to select ‘‘unknown’’: (1) The 

type of action or proceeding (that may 

be selected from a drop down box); (2) 

the approximate year that the event was 

initiated; and (3) the status of the event 

(that may be selected from a list of 

options provided in a drop down box). 

While the information requested in 

these three questions would assist 

FINRA’s review of an area of concern, 

FINRA recognizes that by providing the 

unknown option, it is possible that 

some members may not possess 

definitive information needed to answer 

the questions. If the member responds 

‘‘unknown’’ when requested to provide 

the name of the entity or individual 

with the disciplinary history, there are 

no more questions. 

Use of Proceeds 

The Offering Information section 

would be revised to include a 

reformulation of the existing request for 

information regarding the use of the 

offering proceeds. Currently, the Filer 

Form asks whether the issuer is ‘‘able 

to’’ use offering proceeds to make or 

repay loans to, or purchase assets from 

any officer, director or executive 

management of the issuer, sponsor, 

general partner, manager, advisor or any 

of the issuer’s affiliates. The proposed 

changes to the Filer Form would reformulate the current question by asking 

whether the issuer ‘‘intends to’’ use 

(rather than is ‘‘able to’’ use) 22 offering 

proceeds to make or repay loans to, or 

purchase assets from, the listed persons. 

The proposed changes to the Filer Form 

also would expand the scope of the 

current question by asking whether the 

issuer intends to ‘‘otherwise direct 

investor proceeds’’ to the listed persons. 

The question would retain the option to 

respond ‘‘unknown.’’ If the member 

responds ‘‘yes’’ to this question despite 

the option to respond ‘‘unknown,’’ the 

proposed changes to the Filer Form 

would add a request for the member to 

identify the type(s) of payment(s) and 

the approximate dollar amount, and 

would provide the option to respond 

‘‘unknown.’’ 

Private Securities Transactions 

The Offering Information section 

would be revised to add a question 

regarding identification of private 

securities transactions. FINRA seeks to 

have more information regarding how 

frequently private offerings are sold by 


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8822 Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 

23FINRA 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 person’s 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. 

24See Securities Act Release No. 10238 (October 

26, 2016), 81 FR 83494 (November 21, 2016). 

25 15 U.S.C. 78o–3(b)(6). 

26The 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. 

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.’’ 

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 member’s 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 

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 

member’s 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 15A(b)(6) 

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 

trade, and, in general, to protect 

investors and the public interest, in that 

it will assist in FINRA’s 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 Organization’s 

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 FINRA’s regulatory objectives. 

Regulatory Need 

The proposed Filer Form changes are 

intended to streamline the existing 

information collection procedure in 

fulfilling FINRA’s 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 

FINRA’s 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 FINRA’s existing private 

placement regulatory procedure. FINRA 

has collected information detailing 


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Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 8823 

27Among 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. 

28The rest of the filings provided either ‘‘no’’ or 

‘‘unknown’’ answers to these questions. 

29As mentioned earlier, the proposal would also 

make minor changes to clarify existing questions 

and improve the accuracy of responses in the Filer 

Form. 

30 15 U.S.C. 78s(b)(3)(A). 

31 17 CFR 240.19b–4(f)(6). 

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 

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 

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 proposal’s 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 

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 Organization’s 

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 

19(b)(3)(A) of the Act 30 and Rule 19b– 

4(f)(6) 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 Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2021–002 on the subject line. 


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8824 Federal Register / Vol. 86, No. 25 / Tuesday, February 9, 2021 / Notices 

32 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5 17 CFR 240.19b–4(f)(6)(iii). 

6See SR–CboeBZX–2020–094; SR–CboeBYX– 

2020–034; SR–CboeEDGA–2020–032; SR– 

CboeEDGX–2020–064. 

7The current language relating to billing errors 

and fee disputes is located at the end of the fees 

schedule. The Exchange proposes to relocate the 

new language relating to billing errors and fee 

disputes to the top of the fees schedule. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–FINRA–2021–002. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2021–002 and should be submitted on 

or before March 2, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02588 Filed 2–8–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91049; File No. SR–C2– 

2021–002] 

Self-Regulatory Organizations; Cboe 

C2 Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Establish a Policy 

Relating to Billing Errors 

February 3, 2021. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 

22, 2021, Cboe C2 Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘C2’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A)(iii) of the Act 3 and 

Rule 19b–4(f)(6) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe C2 Exchange, Inc. (‘‘C2’’ or the 

‘‘Exchange’’) is filing with the Securities 

and Exchange Commission (the 

‘‘Commission’’) a proposed rule change 

to establish a policy relating to billing 

errors. The Exchange has designated 

this proposal as non-controversial and 

provided the Commission with the 

notice required by Rule 19b–4(f)(6)(iii) 

under the Act.5

The text of the proposed rule change 

is provided in Exhibit 5. The text of the 

proposed rule change is available on the 

Exchange’s website at http://

markets.cboe.com/, at the Exchange’s 

principal office and at the Public 

Reference Room of the Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend a 

provision of its fees schedule which 

relates to billing errors and fee disputes. 

The Exchange currently provides that 

that any potential billing errors relating 

to fees assessed by C2 must be brought 

to the attention of C2’s Accounting 

Department within three months from 

the invoice date. Additionally, all fees 

assessed shall be deemed final and nonrefundable after three months from the 

invoice date. However, the fees 

schedule further provides that the 

Exchange is not precluded from 

assessing fees more than three months 

after they were incurred if those fees 

were required to be paid pursuant to the 

C2 Fee Schedule in effect at the time the 

fees were incurred. The Exchange 

proposes to eliminate the current 

language in the fees schedule and 

replace it with language recently 

adopted by its affiliated exchanges.6

Particularly, the Exchange proposes to 

provide: ‘‘All fees and rebates assessed 

prior to the three full calendar months 

before the month in which the Exchange 

becomes aware of a billing error shall be 

considered final. Any dispute 

concerning fees or rebates billed by the 

Exchange must be submitted to the 

Exchange in writing and must be 

accompanied by supporting 

documentation.’’ 7

The proposed language would result 

in all fees and rebates assessed prior to 

the three full calendar months before 

the month in which the Exchange 

becomes aware of a billing error to be 

considered final. Particularly, the 

Exchange will resolve an error by 

crediting or debiting Trading Permit 

Holders (‘‘TPHs’’) and Non-TPHs based 

on the fees or rebates that should have 

been applied in the three full calendar 

months preceding the month in which 

the Exchange became aware of the error, 

including to all impacted transactions 


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