FINRA Rule 5110 (the Corporate Financing Rule) generally regulates underwriting compensation and prohibits unfair arrangements in connection with the public offering of securities. SR -FINRA -2014- 004) February 5, 2014 . The term “offering proceeds” means the proceeds of all the securities offered in the public offering by participating members, not including securities subject to an overallotment option, securities to be received by the participating members, or underlying securities. (D) Non-cash compensation arrangements between a member and its associated persons or a company that controls a member company and the member's associated persons, provided that no unaffiliated non-member company or other unaffiliated member directly or indirectly participates in the member's or non-member's organization of a permissible non-cash compensation arrangement; and. The Clinic does not charge attorneys’ fees. (B) advisory or consulting services provided to the issuer by an independent financial adviser. (iv) the issuer shall not be responsible for paying the termination fee unless an offering or other type of transaction (as set forth in the agreement) is consummated within two years of the date the engagement is terminated by the issuer; (6) any right of first refusal to participate in the distribution of a future public offering, private placement or other financing that: (A) has a duration of more than three years from the commencement of sales of the public offering or the termination date of the engagement between the issuer and member; or. 3&n{oxC1�Ǔ ���*+_9�Y�4,����Ȏ�L/��G*� ��=�J�u��������D/ (iv) 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; (B) institutional investors beneficially own at least 33% of the issuer's total equity securities, calculated immediately prior to the transaction; and. Notwithstanding paragraph (j)(22), FINRA may exclude securities acquired from a third-party entity from underwriting compensation. (ii) if not filed with or submitted to any such regulatory authority, at least 15 business days prior to the commencement of sales. (B) the security can be accurately valued, as required by paragraph (g)(1) of this Rule. The term “experienced issuer” means an entity that has: (A) a reporting history of 36 calendar months immediately preceding the filing of the registration statement; and. (D) securities which are defined as “exempted securities” in Section 3(a)(12) of the Exchange Act. 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 . (B) advisory or consulting fees for services provided in connection with the offering that subsequently is completed according to the terms of an agreement entered into by an issuer and a participating member; (5) any underwriting compensation in connection with a public offering that is not completed according to the terms of an agreement entered into by an issuer and a participating member, except, (A) the reimbursement of accountable expenses actually incurred by the participating member; and. State Registrants and State Exempt Reporting Advisers: Initial Set-Up Fee: Charged when a firm submits its first electronic Form ADV. (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). .07 Venture Capital Transactions. x�cd```d`N L�@�/@��;���f`d�x���I�HL�c������&A�`, �D��v� 8� 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. FINRA has granted a limited exemption from the filing requirements of FINRA Rules 5110 and 5121. Statutory Discrimination Filing Fee Claimant – The fee a claimant pays to file a claim involving statutory employment discrimination claims. Mar. (C) "Offeror" shall mean an issuer, an adviser to an issuer, an underwriter and any affiliated person of such entities. 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 … FINRA recently posted Frequently Asked Questions (FAQ) about amended Rule 5110, which address filing requirements; shelf offerings; definitions; and fees and compensation to foreign affiliates. 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. On June 27th, FINRA announced new fees. The amendments modernize, restructure, and streamline Rule 5110. FINRA Proposes a Retail Communication Filing Requirement for Private Placements SEC Enforcement Annual Report FY2020: Key Takeaways and Trends PCAOB Report on Critical Audit Matters (ii) the public offering price per security; (D) multiplied by the number of securities underlying the warrants; (E) less the total price paid for the warrants; (F) divided by the offering proceeds; and. (b) The term “derivative instrument” means any "eligible OTC derivative instrument" as defined in SEA Rule 3b-13(a)(1), (2) and (3). 135 0 obj <<38b1176109a1d137a9f0fa6b164c3809>]>>stream Need Help? (B) any relative who either lives in the same household as, has a business relationship with, provides material support to, or receives material support from, an associated person of a member, including, but not limited to, a parent, sibling, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. (1) A description of each item of underwriting compensation received or to be received by a participating member must be disclosed in the section on distribution arrangements in the prospectus or similar document. Elimination of Filing for Certain ETFs . The amendments institute substantive, clarifying, organizational and terminology changes, while preserving the basic principles of the FINRA corporate financing Rule and FINRA equity. (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. The term “underwriting compensation” means any payment, right, interest, or benefit received or to be received by a participating member from any source for underwriting, allocation, distribution, advisory and other investment banking services in connection with a public offering. The definitions in Rule 5121 are incorporated herein by reference. Description of the Proposed Rule Change 6 FINRA Rule 5110, among other things, regulates underwriting compensation, requires the filing of specified information in connection with public offerings in which members will . This is MoFo. On April 25, 2019, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filed proposed amendments to FINRA Rule 5110 (“FINRA Rule 5110” or “the Rule”), commonly referred to as the “Corporate Financing Rule”, with the U.S. Securities and Exchange Commission (“SEC”). FINRA is proposing to allow members more time to Filing Requirements . (2) fees and expenses paid or reimbursed to, or paid on behalf of, the participating members, including but not limited to road show fees and expenses and due diligence expenses; FINRA operates the largest securities dispute resolution forum in the United States, Report a concern about FINRA at 888-700-0028. 1 An arbitration filing fee calculator is available at FINRA's website. 128 0 obj <>stream (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. FINRA’s amendments address, among other things, (1) filing requirements; (2) filing requirements … (B) has more than one opportunity to waive or terminate the right of first refusal in consideration of any payment or fee; (7) any payment or fee to waive or terminate a right of first refusal to participate in a future public offering, private placement or other financing that is not paid in cash; (8) the receipt of underwriting compensation consisting of any option, warrant or convertible security that: (A) is exercisable or convertible more than five years from the commencement of sales of the public offering; (B) has more than one demand registration right at the issuer's expense; (C) has a demand registration right with a duration of more than five years from the commencement of sales of the public offering; (D) has a piggyback registration right with a duration of more than seven years from the commencement of sales of the public offering; (E) has anti-dilution terms that allow the participating members to receive more shares or to exercise at a lower price than originally agreed upon at the time of the public offering, when the public shareholders have not been proportionally affected by a stock split, stock dividend, or other similar event; or. The Financial Industry Regulatory Authority, Inc. ("FINRA") recently released Regulatory Notice 20-10, which discusses the recent changes to Rule 5110 (Corporate Financing Rule – Underwriting Terms and Arrangements) (the "Rule"), the main FINRA rule regarding the reasonableness of compensation paid to FINRA member firms in securities offerings. To be specific, FINRA will amend Schedule A to require applicants submitting CMAs to pay application fees based on the number of their registered persons and the type of ownership, control, or business operation change being contemplated. Self -Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change and Amendment No. Overview: In September 2020, the Financial Industry Regulatory Authority (FINRA) implemented significant amendments to Rule 5110. (B) Any member acting as a managing underwriter or in a similar capacity must notify the other members participating in the public offering if informed of an opinion by FINRA that the underwriting terms and arrangements are unfair and unreasonable and the proposed terms and arrangements have not been appropriately modified. (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. (v) all requests for withdrawal filed with or submitted to the SEC or any other U.S. regulatory authority, including any correspondence submitted to the SEC for the withdrawal of confidential filings or submissions. 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"). The amended Rule allows FINRA (B) a termination fee or a right of first refusal, as set forth in a written agreement entered into by an issuer and a participating member, provided that: (i) the agreement specifies that the issuer has a right of "termination for cause," which shall include the participating member's material failure to provide the underwriting services contemplated in the written agreement; (ii) an issuer's exercise of its right of "termination for cause" eliminates any obligations with respect to the payment of any termination fee or provision of any right of first refusal; (iii) the amount of any termination fee must be reasonable in relation to the underwriting services contemplated in the agreement and any fees arising from underwriting services provided under a right of first refusal must be customary for those types of services; and. (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 … 1. (iii) the transfer or sale of the security back to the issuer in a transaction exempt from registration with the SEC. You will have to pay FINRA a filing fee, which is calculated in relation to the size of your claim. 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. The term “participating member” means any FINRA member that is participating in a public offering, any affiliate or associated person of the member, and any immediate family, but does not include the issuer. |�@f�@ ���k������#��=�5�s �9���ߌ���0S!�)�kX,)�[�"�Qv�[X��Es��z7�}��-i�G��d>9�7((Mj�P�e@1���u��q�}Hd����0א�h��1� .06 Non-Convertible or Non-Exchangeable Debt Securities and Derivatives. Elimination of Filing for Certain ETFs. To determine whether an acquisition of securities that occurs after the required filing date may be excluded from underwriting compensation, FINRA will consider the following factors, as well as any other relevant factors and circumstances: .03 Underwriting Compensation Securities Acquired Other than from the Issuer. 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"). I. 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. 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