SEC Approves FINRA Rule Related to Private Placements

On June 7, 2012, the SEC approved, on an accelerated basis, new FINRA Rule 5123 “Private Placements of Securities”).  The new rule will require, subject to certain exceptions, FINRA member firms that sell securities in certain private placements to submit a notice filing with FINRA, including disclosure documents, if any, utilized in the offering.  FINRA has noted that the filing requirement is a notice filing only.  Therefore, issuers and member firms should not expect to receive FINRA comments or input before commencing an offering.

SEC Extends Compliance Date for Third-Party Solicitor Provisions of Advisers Act Pay-to-Play Rule

On June 8, 2012, the SEC extended the compliance date for the third-party solicitor provisions of Rule 206(4)-5 of the Advisers Act (the “Pay-to -Play Rule”). The Pay-to-Play Rule, among other things, prohibits an adviser from providing or agreeing to provide, directly or indirectly, compensation to any person to solicit a government entity for investment advisory services on behalf of such adviser unless the person is an executive officer, general partner, managing member or employee of the adviser, or such person is a registered investment adviser, a registered broker-dealer, or a registered municipal adviser. 

The SEC extended the compliance date for the third-party solicitor provisions of the Pay-to-Play Rule until nine months after the compliance date of a final rule adopted by the SEC related to the registration of municipal advisor firms. Once the final rule regarding the registration of municipal advisor firms is adopted, the SEC will issue the new compliance date for the ban on third-party solicitations.

NASDAQ Speaks – Potential Changes to Compensation Committee Rules and Roll-out of New and Improved Reference Library

At the “NASDAQ Speaks ’12: Latest Developments and Interpretations” webcast  held on June 7th, there were a couple of interesting items to note.  With respect to compensation committee rules, NASDAQ is considering the following changes, subject to the SEC adopting final rules under the Dodd-Frank Act and NASDAQ issuing proposed rules which become final:

  1. All companies will be required to have a compensation committee with at least 2 members.  This differs from the audit committee NASDAQ rule which requires at least 3 directors to serve on the audit committee.  Under the current NASDAQ rules, either  a compensation committee or  independent directors may approve or recommend executive compensation; and
  2. For a director to serve on the compensation committee, similar to the audit committee rules, such director will not be able to accept any consulting, advisory or other compensatory fee, directly or indirectly, other than for board services.  Additionally, the board must consider affiliation a director has with the company.   NASDAQ does not think significant ownership of the company’s securities should bar a director from serving on the compensation committee.

This summer NASDAQ is also going to roll-out its new and improved reference library which will permit a user to search reference sources by category, such as staff interpretations, listing council decisions and frequently asked questions.  The new reference liability will have an advanced search feature allowing users to search across different reference sources, by year, category and sub-category and keywords.  The search results will be expandable and color coded by source.

SEC Issues New FAQs Related to Form ADV


The SEC recently issued two new FAQs clarifying certain reporting requirements in Form ADV.  The first new FAQ explains how assets are defined for purposes of responding to Form ADV’s question as to whether an adviser had $1 billion or more in assets as of the last day of the adviser’s most recent fiscal year end. The other new FAQ explains that an investment adviser registered with the SEC that files an annual updating amendment reporting that the adviser is not eligible for SEC registration must withdraw from registration within 180 days of its fiscal year end, unless the adviser then is eligible for SEC registration. Therefore, if a firm is registered with the SEC and reports having regulatory assets under management of less than $90 million on its annual updating amendment, but subsequently obtains $90 million or more in regulatory assets under management during the 180 day period, such adviser does not need to withdraw from SEC registration.


SEC Launches New Website

The SEC has launched a new website. The website looks fresh and modern.  At first, I found myself at a loss as to where to look for familiar links, but the website seems to be user friendly and easy to navigate.  It is interesting to note some of the topics that the SEC has chosen to cover prominently on the main page as they reflect the SEC’s current focus: initiatives under the Dodd-Frank Act, insider trading, Foreign Corrupt Practices Act, and whistleblower complaints.  In addition, the SEC has kept on its main page a link to the notice reminding investors that any offers or sales of securities relying on the crowdfunding exemption would be unlawful under the federal securities laws until the SEC adopts rules implementing such exemption.

SEC Issues Additional FAQs on JOBS Act

The SEC today issued additional Jumpstart Our Business Startups Act (JOBS Act) frequently asked questions (FAQs 18-41).  These FAQs address questions relating to emerging growth company status,  treatment of comment letters on confidential submissions of draft registration statements and issuer responses to such comment letters, financial accounting standards and restatement of financial statements, foreign private issuers’ compliance with the JOBS Act, and disclosures required in registration statements and periodic reports filed by emerging growth companies.  The new FAQs represent helpful additional guidance for emerging growth companies considering whether to take advantage of “IPO on Ramp” provisions of the JOBS Act.