Document ID: SEC-2017-0530-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2017-04-03T04:00Z

[Federal Register Volume 82, Number 62 (Monday, April 3, 2017)]
[Notices]
[Pages 16245-16247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06442]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80321; File No. SR-FINRA-2017-008]

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

March 28, 2017.
    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 March 17, 2017, 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.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6). FINRA has given the Commission 
written notice of its intent to file 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.
    \4\ The text of the proposed rule change is available at the 
principal office of FINRA, on FINRA's Web site at http://www.finra.org, and at the Commission's Public Reference Room.
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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.\5\ When 
Rule 5123 became effective on December 3, 2012,\6\ FINRA required 
members to use the Filer Form for filings under both rules.\7\ Members 
submit the Filer Form and relevant offering documents to FINRA through 
the FINRA Firm Gateway.\8\ 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.\9\ The changes proposed herein would further update the 
version of the Filer Form that has been in use since 2013 for filings 
made pursuant to Rule 5122 and Rule 5123.
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    \5\ Both 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).
    \6\ See 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).
    \7\ See 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).
    \8\ FINRA Firm 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.
    \9\ See 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).
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    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. FINRA proposes changes to the Filer Form that will add, 
clarify and eliminate questions or other information requested in each 
section. Members may respond ``unknown'' for all new requests for 
information. Therefore, the Filer Form, as proposed to be modified, 
would not impose any new obligation on broker-dealers to seek out 
information that they do not already have. FINRA describes these 
proposed changes below.
    The Participating Member section of the Filer Form would add 
questions regarding whether the member making the filing (``filing 
member'') is the exclusive selling agent in the private placement and 
whether there is any affiliation between the issuer or sponsor of the 
private placement with any member participating in the offering upon 
whose behalf the filing member is submitting the Filer Form. This 
section would no longer require the title and email address for the 
contact person of the filing member or the contact name, title and 
telephone number for other members identified in the filing.
    The Issuer Information section of the Filer Form would add a 
question asking whether the issuer is a reporting company. This section 
would no longer require the filing member to enter the name, title and 
email address of the issuer's contact person.
    The Offering Information section would add questions regarding:
     The type of security the issuer is offering;
     whether the issuer raised capital within the preceding 12 
months from any source (excluding loans or investments by affiliates);
     minimum investment amount that the issuer will accept and 
whether the issuer can waive that minimum;
     whether the filing member sold or will sell the offering 
to any non-accredited investors;
     the exemption from the Securities Act of 1933 that the 
issuer is relying upon; \10\ and
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    \10\ FINRA notes that one of the exemptions listed on the Filer 
Form is Rule 505 of Regulation D. The SEC has recently repealed Rule 
505, with a stated effective date of May 22, 2017, in connection 
with its amendments to exemptions to facilitate intrastate and 
regional securities offerings. See Securities Exchange Act Release 
No. 79161, 81 FR 83494 (November 21, 2016). FINRA will modify the 
Filer Form to remove the reference to Rule 505 following the 
effective date of the repeal of that rule.

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[[Page 16246]]

     for contingency offerings, whether a contingency has been 
met as of the date of the filing.
    The Offering Information section would also request the date on 
which the filing member first offered or sold the private placement and 
allow the filing member to indicate that sales have yet to commence. 
The Offering Information section would no longer include the 
requirements to provide the aggregate amount of non-commission 
compensation and the offering's conclusion date. This section also 
would no longer include the questions asking whether the member used a 
term sheet, whether the issuer has any independently audited financial 
statements and whether the issuer's directors are independent. In 
addition, the Offering Information section would clarify that the 
requirement to provide the stated or target rate of return is relevant, 
only if an offering document provides an actual or target rate of 
return to investors. Finally, this section also would clarify that the 
question regarding general solicitation only seeks information 
regarding whether the filing member or the issuer has, in fact, engaged 
in general solicitation in connection with the private placement at or 
before the time of filing.
    FINRA believes that these revisions will assist it in fulfilling 
its regulatory responsibilities by improving the information about the 
nature of the private placement and members' role in offering the 
securities. Specifically, FINRA proposes to eliminate questions or data 
fields that were not as useful as anticipated, clarify questions that 
may have raised questions with members, and add other questions that, 
with the benefit of experience, FINRA believes will help it better 
understand the issues and potential risks associated with a private 
placement (e.g., an offering with an unmet contingency).\11\
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    \11\ FINRA published Regulatory Notice 16-08 (February 2016) to 
highlight issues that FINRA has observed concerning members' 
compliance with SEA Rules 10b-9 and 15c2-4.
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    FINRA has filed the proposed changes for immediate effectiveness. 
FINRA anticipates that the implementation date will be May 22, 2017.
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,\12\ 
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 will assist FINRA 
in evaluating the specified private placement activities of members and 
assess whether members are conducting a reasonable investigation for 
specified private placement offerings in which they participate.
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    \12\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed changes to the Filer Form 
will result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. FINRA notes that 
all members that participate in specified private placements will have 
to file electronically (or have another member that is participating in 
the specified private placement file on its behalf) a Filer Form in 
connection with the rules. In addition, all of the new questions 
proposed herein permit members to respond ``unknown.''
    Because the proposed Filer Form does not impose an affirmative duty 
on members to obtain answers, but only requires the member to provide 
the information on the Filer Form if known, FINRA believes that the 
proposed changes present no new burden upon filing members. In light of 
the role of the rules and the accompanying Filer Form in assisting 
FINRA in its efforts to detect and prevent fraudulent and manipulative 
acts and practices and enhance the protection of investors, FINRA does 
not believe that the proposed changes will result in any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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 \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    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-2017-008 on the subject line.

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-2017-008. 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 Web site (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 Web site 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

[[Page 16247]]

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; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-FINRA-2017-008 and 
should be submitted on or before April 24, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06442 Filed 3-31-17; 8:45 am]
 BILLING CODE 8011-01-P