FINRA modified a proposal that would amend FINRA Rule 5110 ("Corporate Financing Rule - Underwriting Terms and Arrangements") to make "substantive, organizational and terminology" changes.

As previously covered, FINRA stated that the proposal would simplify certain provisions while maintaining protections for market participants. In addition, the proposal would update cross-references and make technical changes to other FINRA rules as a result of the amendments.

As modified in response to public feedback, FINRA's proposed amendments would, among other things:

  • clarify and reduce filing requirements;
  • codify filing requirement exemptions for shelf offerings;
  • expand and clarify the scope of Rule 5110 exemptions;
  • amend the definition of "underwriting compensation";
  • modify, clarify and expand the venture capital exceptions;
  • clarify the treatment of nonconvertible or non-exchangeable debt securities and derivatives;
  • clarify "lock-up" restrictions and adding an exception from such restrictions for certain securities acquired from an issuer;
  • modify and clarify the list of prohibited unreasonable terms and arrangements related to a public offering;
  • consolidate and modernize certain defined terms under Rule 5110; and
  • modify the proposed Supplementary Material .01(a)(7) concerning underwriting compensation.

Comments on the proposal must be submitted by January 21, 2020.

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