FINRA Funding Portal Rules Approved

The SEC approved new FINRA Rule 4518 as part of FINRA’s proposal to establish the new Funding Portal Rules and related forms.

This Notice provides further guidance on new Rule 4518, which applies to registered broker-dealer members of FINRA that contemplate acting as intermediaries in transactions involving the offer or sale of securities pursuant to the crowdfunding provisions of Title III of the JOBS Act and the SEC’s Regulation Crowdfunding.

Under the new rule, registered broker-dealer members must provide notification to FINRA, as specified in the rule and as discussed further in this Notice, prior to engaging in such activities.

FINRA Rule 4518 will become effective on January 29, 2016.


Regulatory Notice 16-07 | FINRA.org:

Considering a Direct Private Placement?

As the markets and the economy recovers, we start to see more requests for assistance in capital raises, either for investments in hedge funds, private equity groups, or in issuers through private placements.

On occasion, we are contacted by business people who are interested in raising capital, but who want to do so without paying a fee to a brokerage firm, and who believe they can raise sufficient funds on their own, using their existing contacts.

The securities laws do in fact permit such an offering - a properly documented and structured Regulation D offering can be conducted by the officers and directors of the issuer. The question is not whether it is permitted, but rather, should it be done.

The process can be time consuming, and loaded with potential pitfalls and securities law violations. While the SEC has tried to make the capital raising process easier for small businesses, there has not been much success in practice. The simple fact is that business owners are business people, not securities sales people. They do not have the knowledge or business acumen to enable them to successfully, and legally, sell securities.

Additional issues arise in the structure of the offering. Many entrepreneurs learn that they were unable to raise sufficient capital, that they spent far too much time on the offering rather than operating their business, and, adding insult to injury, that the amount that they intended to raise was not enough to address their business needs.

For more detail on those issues, Professor William K. Sjostrom has published an excellent paper on the topic, Direct Private Placements, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2442522.

Penny wise, pound foolish? If you are looking to take on investors, hire a securities lawyer to assist you in the process, and retain an experienced broker-dealer to conduct the offering for you. You can concentrate on running your company, and your professionals can run your offering.

Related Articles

Introduction to Private Placements

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Questions? Comments? Considering a private placement? Call me to see how we can help - 212-509-6544 or send me an email - mja@sallahlaw.com

Stock Offerings on the Rise

While the smaller cap public offering market has been depressed for many years, we may be seeing an increase in those offerings. Wile we have been experiencing an increase in inquiries regarding private placements, some investment firms are reporting significant increases in their underwriting activity.

This week Jefferies Group said profit rose 68% as stock underwriting more than doubled and investment- banking revenue reached a record. The firm reported a 47% increase in investment-banking revenue on the equity-underwriting gains. Global corporate-bond underwriting jumped 58% to $1.08 trillion in Jefferies’s fiscal fourth quarter from the previous three months, and global equity underwriting rose 77% to $221.1 billion, according to data compiled by Bloomberg.

For more information - Jefferies Net Income Increases 68% as Underwriting Gains
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The attorneys at Sallah Astarita & Cox  have decades of experience in all aspects of securities law and regulation. Mark Astarita, one of our partners, is the author of two popular introductory articles  - Introduction to the Federal Securities Laws and Introduction to Private Placements, which are available at SECLaw.com.

For more information about raising capital, and the SEC's new CrowdFunding proposals, call him at 212-509-6544 or at email us

SEC Releases Crowd Funding Proposal

The Crowd Funding proposal has been released by the SEC today. If adopted, entrepreneurs and start-up companies looking for investors will be able to solicit over the Internet from the general public, a historic change in the regulatory structure regarding fund raising. Current regulations effectively limit solicitation of accredited investors - those with a net worth of at least $1 million, excluding the value of their homes, or annual income of more than $200,000. The crowdfunding rule would let small businesses raise up to $1 million a year by tapping unaccredited investors

We will have more once we review the proposal, but for those who can't wait, the proposal is here - SEC Crowd Funding Proposal. The SEC's Press Release - SEC Issues Proposal on CrowdFunding is at their site, as is their site to Submit Comments on CrowdFunding.

Related Articles

• Introduction to Private Placements
• Introduction to the Federal Securities Laws
• SEC takes up crowdfunding plan 
• SEC Releases Long-Awaited Crowd Funding Rule
• SEC releases long-awaited 'crowdfunding' rule