FINRA is proposing to a m end FINRA R ule 5110 (Corporate Financing Rule Underwriting Terms and Arrangements ) to expand the circumstances in which termina tion fees and rights of first refusal are permissible; exempt from the filing requirements certain collective (a) There shall be a fee imposed for the filing of initial documents relating to any offering filed with FINRA pursuant to the Corporate Financing Rule equal to: (1) $500 plus .015% of the proposed maximum aggregate offering price or other applicable value of all securities registered on an SEC registration statement or included on any other type of offering document (where not filed with the SEC), but shall not exceed $225,500; or (2) $225,500 … The terms "compensation," "non-cash compensation" and "offeror" as used in this paragraph (f) shall have the following meanings: (A) “Compensation” shall mean cash compensation and non-cash compensation. We take on all cases on a contingency fee basis, which means we only take a fee if we recover money for you. FINRA Issues Guidance on Implementation of Rule 5110 Amendments Relating to Public Offerings By Latham & Watkins LLP on September 15, 2020 Posted in Securities Regulation. However, investors are responsible for all other costs incurred in an arbitration and/or mediation, such as filing and hearing fees. endstream endobj (c) the nature of the funding provided, including, but not limited to the issuer’s need for funding before the public offering. Contact us online using the form below, or call anytime at 844-689-5754 to schedule a case review. Specifically, required FINRA filings must now be made within three business days (rather than one business day) following the date the registration statement or other document is filed with or confidentially submitted to the SEC. The determination of whether a securities acquisition may be excluded from underwriting compensation pursuant to paragraph (d) is to be made at the time of the securities acquisition. (A) A member that participates in a public offering that is required to be filed under paragraph (a)(2) must file the documents and information specified in paragraph (a)(4): (i) no later than three business days after any documents are filed with or submitted to: a. the SEC, including confidential filings or submissions; or, b. any state securities commission or other similar U.S. regulatory authority; or. For purposes of determining “control,” Rule 5121 is cross-referenced. FINRA is proposing to increase the rate and the fee cap for filings pursuant to FINRA Rule 5110. Such payments generally would not be deemed to be underwriting compensation. 9. to a government sponsored enterprise (“GSE”) conducting a public offering where an affiliate of an underwriter owned more than 10% of the GSE. Notwithstanding paragraph (d), in the event that an offering is significantly delayed and the issuer needs funding pending consummation of the public offering, FINRA may exclude from underwriting compensation any securities acquired in a transaction that otherwise meets the requirements in paragraph (d), but occurs after the required filing date. The remaining revised provisions will be implemented on September 16, 2020. (C) the participating members did not, in the aggregate, purchase or receive as compensation more than 40% of the "total number of securities sold in the private placement" (excluding purchases by any affiliate qualified under paragraph (d)(1)). The term “company” means a corporation, a partnership, an association, a joint stock company, a trust, a fund, or an organized group of persons whether incorporated or not; including any receiver, trustee in bankruptcy or similar official, or liquidating agent of any of the foregoing. When securities are acquired by a participating member, material terms and arrangements of the acquisition must also be disclosed in the section on distribution arrangements in the prospectus (or other similar offering document) when applicable, such as exercise terms, demand and piggyback registration rights and lock-up periods that may apply. .06 Non-Convertible or Non-Exchangeable Debt Securities and Derivatives. SECURITIES OFFERINGS, UNDERWRITING AND COMPENSATION, FINRA Requests Comment on Proposed Amendments to the FINRA Corporate Financing Rule, FINRA Requests Comment on Proposed Amendments to Its Gifts, Gratuities and Non-Cash Compensation Rules, FINRA Filing Requirements and Review of Regulation A Offerings, FINRA Requests Comment on the Effectiveness and Efficiency of its Gifts and Gratuities and Non-Cash Compensation Rules, SEC Approves Amendments to FINRA Rule 5110 to Permit Termination Fees and Rights of First Refusal, SEC Approves Amendments to FINRA Rule 9217 to Include Additional Rule Violations Eligible for Disposition under FINRA’s Minor Rule Violation Plan, FINRA Requests Comment on Proposed Amendments to FINRA Rule 5110 Regarding Deferred Compensation Arrangements in Public Offerings, Changes to Advertising, Corporate Financing, New Membership and Continuing Membership Application, Central Registration Depository and Branch Office Annual Registration Fees, SEC Approves New FINRA Rule 5123 Regarding Private Placements of Securities, New Electronic Filing System for Public Offering Filings, Application of Rules on Communications With the Public and Institutional Sales Material and Correspondence to Certain Free Writing Prospectuses, FINRA Requests Comment on Proposed Amendments to FINRA Rule 5122 to Address Member Firm Participation in Private Placements, FINRA Requests Comment on Proposed Consolidated FINRA Rule Governing Investment Company Securities, SEC Approves Amendments to Modernize and Simplify NASD Rule 2720 Relating to Public Offerings in Which a Member Firm With a Conflict of Interest Participates, SEC Approves New FINRA Rule 5122 Relating to Private Placements of Securities Issued by a Member Firm or a Control Entity. If a participating member wishes to reduce the proposed maximum value of any securities received as underwriting compensation, it may do so by voluntarily agreeing to lock-up such securities for successive 180-day periods (in addition to the initial lock-up period required by paragraph (e) of this Rule if applicable). Elimination of Filing for Certain ETFs . The amendments modernize, restructure, and streamline Rule 5110. Non-convertible securities received as underwriting compensation will have a compensation value based on: (i) either the market price per security on the date of acquisition, or, if no bona fide public market exists for the security, the public offering price per security; and. SR -FINRA -2014- 004) February 5, 2014 . (1) Purchases and Loans by Certain Affiliates — Securities of the issuer purchased in a private placement or received as compensation in connection with the provision of a loan or credit facility before the required filing date of the public offering pursuant to paragraph (a) by a participating member’s affiliate, if: (A) the affiliate is a separate and distinct legal person from any member participating in the offering and is not registered as a broker-dealer; (B) the investment or loan was made subject to the evaluation of individuals who have a contractual or fiduciary duty to select investments and loans based on the risks and rewards to the affiliate and not based on opportunities for the member participating in the offering to earn investment banking revenues; (C) the affiliate does not receive investment banking fees paid to any participating member for underwriting public offerings; (D) the affiliate, directly or through a subsidiary it controls, is primarily engaged in the business of making investments in or loans to other companies or is an entity that has been newly formed by such affiliate; and. (B) An occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target. 128 0 obj <>stream An arbitration filing fee calculator is available at FINRA's website. As amended, Rule 5110 provides additional time to make required FINRA filings. All public offerings in which a member participates must be filed with FINRA for review, except as exempted from the filing requirement under paragraph (h). (B) at least $150 million aggregate market value of voting stock held by non-affiliates; or alternatively the aggregate market value of the voting stock held by non-affiliates of the issuer is $100 million or more and the issuer has had an annual trading volume of such stock of three million shares or more. The term “effective date” means the date on which an issue of securities becomes legally eligible for distribution to the public. The term “issuer” means a registrant or other person that is offering its securities to the public, any selling security holder offering securities to the public, any affiliate of the registrant or such other person or selling security holder, and the officers or general partners, and directors thereof, but does not include a participating member unless the participating member is itself the registrant or a selling security holder offering its own beneficially held securities to the public. Statutory Discrimination Filing Fee Claimant – The fee a claimant pays to file a claim involving statutory employment discrimination claims. Posted in FINRA. x��\[o�F~���cD The following list, while not comprehensive, provides examples of payments that are not deemed to be underwriting compensation: .02 Venture Capital Transactions and Significantly Delayed Offerings. The term “overallotment option” means an option granted by the issuer to the participating members for the purpose of offering additional shares to the public in connection with the distribution of the public offering. FINRA IS A REGISTERED TRADEMARK OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (A) No member or person associated with a member shall participate in a public offering in which the terms and conditions relating thereto, including the aggregate amount of underwriting compensation, are unfair or unreasonable pursuant to this Rule or inconsistent with any By-Law or any rule or regulation of FINRA. Rule 5110 also regulates non-cash compensation, prohibited compensation, various lock up provisions the issuer may have with a broker-dealer, and rights of first refusal. %PDF-1.5 %���� Additionally, you may need to pay some fees for other incidental costs as the process moves forward. x�c```b``����� u�A���b,@�� 4����"@��'L�TV��Pe�r@����� H���@��� ���r&����L�sw~`�f��t`�~Q�B�&�7 |�� General Filing Requirements Filing deadline. (A) The following documents required to be filed under paragraph (a) must be filed in FINRA's Public Offering System for review by providing the SEC document identification number if available: (i) the registration statement, offering circular, offering memorandum, notification of filing, notice of intention, application for conversion, and any other document used to offer securities to the public; (ii) all documents relevant to the underwriting terms and arrangements, including any proposed underwriting agreement, agreement among underwriters, selected dealer’s agreement, agency agreement, purchase agreement, letter of intent, engagement letter, consulting agreement, partnership agreement, underwriter's warrant agreement, or escrow agreement, provided that industry-standard master forms of agreement need not be filed unless otherwise specifically requested by FINRA; (iii) if amendments to any documents previously filed contain changes that impact the underwriting terms and arrangements for the public offering, marked pages showing the changes to such document; (iv) the final registration statement declared effective by the SEC, or the equivalent final offering document, the notice of effectiveness issued by the SEC or any other U.S. regulatory authority, the executed form of the final distribution-related documents and any other document submitted to FINRA for review, each if applicable; and. Notwithstanding paragraph (j)(15) and (22), FINRA may exclude from underwriting compensation securities acquired by a participating member’s associated persons or their immediate family pursuant to an issuer directed sales program. In connection with the sale and distribution of a public offering of securities, no member or person associated with a member shall directly or indirectly accept or make payments or offers of payments of any non-cash compensation, except as provided below. (H) provided, however, that, notwithstanding paragraph (c)(4) of this Rule, such warrants shall have a compensation value of at least .2% of the offering proceeds for each amount of securities that is up to 1% of the securities being offered to the public (excluding securities subject to an overallotment option). (A) for a firm commitment offering, the 180-day period preceding the required filing date through the 60-day period following the effective date of the offering; (B) for a best efforts offering, the 180-day period preceding the required filing date through the 60-day period following the final closing of the offering; and. As of September 16, 2020 (the Amendment Implementation Date), FINRA members participating in public offerings of securities must comply with Rule 5110 as amended by … (B) For a public offering exempt from filing under paragraph (h), the term “required filing date” means the date the public offering would have been required to be filed with FINRA but for the exemption. 126 0 obj <> endobj Filing fee: $500 plus .01% of the proposed maximum aggregate offering price of the offering, not to exceed a fee of $75,500 The maximum fee applies to all WKSI filings Fee should be paid prior to filing . On March 20, 2020, FINRA announced in Regulatory Notice 20-10 that it has amended FINRA Rule 5110 (the “Corporate Financing Rule” or the “Rule”). Securities acquired in transactions that meet the requirements of this paragraph (d) are excluded from underwriting compensation and not subject to the lock-up requirements of paragraph (e)(1), provided that the member does not condition its participation in the public offering on an acquisition of securities in a transaction that meets the requirements of this paragraph and any securities acquired are acquired at the same price and with the same terms as the securities purchased by all other investors. Non-cash compensation arrangements must be consistent with the applicable requirements of SEA Rule 15l-1 ("Regulation Best Interest") and are limited to the following: (A) Gifts that do not exceed an annual amount per person fixed periodically by the Board of Governors. SECURITIES OFFERING AND TRADING STANDARDS AND PRACTICES, 5100. FINRA’s amendments address, among other things, (1) filing requirements; (2) filing requirements … (A) Any underwriting compensation consisting of securities must not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities for a period of 180 days beginning on the date of commencement of sales of the public equity offering, except as provided in paragraph (e)(2). The Corporate Financing Rule addresses commercial fairness in underwriting and other arrangements for the distribution of securities. We deploy deep expertise, leading technology and extensive market intelligence to serve as the first line of oversight for the brokerage industry - all at no cost to taxpayers. �ߙ%I�܋TWg�F�_��,ASy��2�?��>�d#�^]�?�.��рYV�-��ؓ��,"��H?�5�#rb���#��+�x!ܦ��ۢ"W�]���›�Ү�7�S��`� �C�������� ��:A�r���,���vq�{#�vm��D� 2 Mayer Brown | Corporate Financing Rule Change (FINRA Rule 5110) An experienced issuer is defined as an issuer with a 36-month reporting history and at least $150 (D) FINRA will provide confidential treatment to all documents and information filed pursuant to this Rule and use such documents and information solely for regulatory purposes. So when you use a broker-dealer to assist you with your Regulation A offering, keep in mind that a FINRA Rule 5110 filing is also required in addition to your SEC Form 1-A filing. Under the Amended Rule 5110, members will be allowed more time to make required filings with FINRA, increasing the time from one business day to three business days after filing with the SEC. File a complaint about fraud or unfair practices. To determine whether an acquisition of securities by a participating member’s associated persons or their immediate family pursuant to an issuer directed sales program may be excluded from underwriting compensation, FINRA will consider the following factors, as well as any other relevant factors and circumstances: .05 Disclosure of Underwriting Compensation. On March 20, 2020, FINRA announced in Regulatory Notice 20-10 1 that it has amended FINRA Rule 5110 (the "Corporate Financing Rule" or the "Rule"). Contact FINRA at 301-590-6500. FINRA’s Corporate Financing Rule . ��k�����o5B�u2��B��^��ۜ�6�%�A�Ow"tm8�!uVjIH}�e�li�Ls��D�ciR֖pn˚�Z.�%��+��}:������=��'���g�®c>�p�\ٛ�9��:���Q)�X�6�a�:�?���sMŚ��3D���9�sb> ǎ��t:�7;� ���h-�&��_���M�k��̅�07dG�z8�עˉ���%���o5�K'I�=�k��� 5�i�7�,}4��`n҅�M�R=���c�����=b8�yH'�}�!��g�2�,�Rߣ��=k���� !�;+{����x������1o��Y���*͝�B�~��0���Y������i�ӦA�7ڠ�[H����gϠ�}",M����7w������@��{#*0��vJ����B�t�yMj����(zӤ�.�7 ���9Č|3�H% FINRA Rule 5110 (the “Corporate Financing Rule”) generally regulates underwriting compensation and prohibits unfair arrangements in connection with the public offering of securities. Of a proposed Rule change and Amendment no Exempt finra 5110 filing fee registration with the SEC FINRA. Will have to pay some fees for other incidental costs as the process moves forward calculator is available at 's! And 5121 FINRA granted the filing requirements of FINRA Rules 5110 and 5121 ) common of. ) any disparity between the price paid and the most pressing issues they are facing ) February,! 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