Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Wednesday, November 27, 2013

SEC Approves FINRA Rule 5123

The Securities and Exchange Commission (the “SEC”) recently approved the Financial Industry Regulatory Authority (“FINRA”) proposals to amend Rule 5123 governing FINRA members who participate in private offerings of securities (“Rule 5123″).
Rule 5123
Rule 5123 requires FINRA members selling securities in non-public offerings such as private placements or who participate in the preparation of private placement documents such as memorandums, term sheets or other disclosure documents to submit such disclosure documents with FINRA within fifteen days after the first sale of securities or state that there were no offering documents used. Rule 5123 will become effective on December 3, 2012.

Exemptions Under Rule 5123

In accordance with Rule 5123(b), the following offerings are exempt from FINRA’s filing requirements of Rule 5123, including:
♦ offerings sold to:
• institutional accounts, as defined in FINRA Rule 4512(c)9;
• qualified purchasers, as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940 (the “Investment Company Act”);
• an entity composed exclusively of qualified institutional buyers, as defined in Rule 144A of the Securities Act of 1933 (the “Securities Act”);
• qualified institutional buyers, as defined in Rule 144A of the Securities Act;
• investment companies, as defined in Section 3 of the Investment Company Act;
• employees and affiliates of the issuer (as defined in FINRA Rule 5121);
• knowledgeable employees as defined in Investment Company Act Rule 3c-5;
• accredited investors as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act;
♦ offerings made pursuant to Rule 144A under the Securities Act or Regulation S;
♦ offerings filed with FINRA under FINRA Rules 2310, 5110, 5121 and 5122, or exempt from filing thereunder in accordance with FINRA Rule 5110(b)(7);
♦ offerings of “variable contracts,” as defined in FINRA Rule 2320(b)(2);
♦ offerings of modified guaranteed annuity contracts and modified guaranteed life insurance policies, as referenced in FINRA Rule 5110(b)(8)(E);
♦ offerings of securities issued in conversions, stock splits and restructuring transactions that are executed by an investor without the need for additional consideration or investments on the part of the investor;
♦ business combination transactions as defined in Securities Act Rule 165(f); and
♦ offerings by registered investment companies.
In limited circumstances, under Rule 5123(d), a FINRA member may be exempt from the requirements of Rule 5123 by a showing of “good cause.”
Electronic Filing System
FINRA is developing a private placement filing system to receive Rule 5123 filings, which will require electronic filings through FINRA’s Firm Gateway electronic system. Despite the filing of Rule 5123 materials with FINRA, FINRA  has indicated that all materials received will remain non-public and used for determining compliance with FINRA rules or other appropriate regulatory requirements.
For more information about recent changes and proposals to FINRA rules please visit
For further information about this article, please visit  and or contact Brenda Hamilton, Securities Attorney, 101 Plaza Real South, Suite 201 S, Boca Raton, Florida 33432, at (561) 416-8956 or by email This information is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings, please contact Hamilton and Associates at (561) 416-8956 or Please note that the prior results discussed herein do not guarantee similar outcomes.

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