FINRA Enhances its Public Offering Review Process

 

Effective September 30th, FINRA instituted enhancements to its public offering review process.  Such enhancements include an immediate clearance process for certain shelf offerings, an expansion of its expedited review program for non-shelf offerings and the introduction of a new limited review process for certain non-shelf offerings of exchange-listed securities.

Immediate Clearance

 FINRA’s review improvements provide member firms with immediate clearance, 24 hours per day, 7 days a week, for shelf filings.  Immediate clearance is available for WKSI filings, new shelf registration statements, and shelf takedowns.  In order to obtain immediate clearance, member firms must:

  • provide background information related to the offering and make the representations required by the existing same-day clearance procedures;
  • undertake to provide all information necessary to complete the filing within three business days; and
  • provide the Fedwire number for the payment of the filing fee.

 Non-Shelf Offerings

 FINRA now has three review programs available for non-shelf filings: full review, expedited review and limited review.  All non-shelf filings will initially be considered to be full review unless a different request is subsequently made.

 Expedited Review.  Effective September 30th, FINRA expanded the expedited review program for non-shelf offerings.  FINRA will determine whether to grant an expedited review request based on the complexity of the proposed arrangements.  PIPEs, resale offerings distributed on a best efforts basis, non-traded investment programs and offerings in which a participating FINRA member firm has acquired unregistered securities during the review period will generally not be eligible for an expedited review. 

 Limited Review.  On September 30th, FINRA implemented a new limited review process for certain non-shelf offerings. The member firm must submit a request for FINRA to consider whether to grant a limited review. For a member firm to request a limited review, the offering must satisfy all of the following criteria:

  •  securities must be listed on a national securities exchange;
  • firm commitment or straight best efforts distribution methods must be used;
  • total underwriting compensation must be within allowable guidelines and may not include securities;
  • underwriting arrangements may not include prohibited terms as defined in FINRA Rule 5110(f)(2), such as indeterminate items of value;
  • FINRA members must be identified in the offering documents and filing system;
  • offering must be filed with the SEC; and
  • offering must not include a new or novel product or be one that poses complex regulatory issues.

 A member firm must also make six representations as part of its request for limited review, although four of such representations may be deferred past the initial request.

 

 

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