The Financial Industry Regulatory Authority wants to collect all the information broker-dealers and representatives share with retail investors when they sell private placements to ensure investors are not being deceived by lofty performance promises or other potentially misleading marketing.
The new proposal Finra filed with the Securities and Exchange Commission would require broker-dealers to file all “retail communications” concerning private placement offerings with the agency, which “could contain information that might be problematic, such as prohibited projections of performance or false or misleading statements about the offerings,” the agency said.
The proposal follows on the heels of the SEC’s newly approved changes that increase the dollar amounts of public offerings of private placements and allow unregistered “finders” to solicit B-D clients’ who qualify as accredited investors with $1 million or more in assets, such 401ks private placements—as long as reps or advisors make the actual sale.
Because Finra members may use a variety of written materials in connection with a private placement, “the current rules may not clearly require filing of materials that would be of interest or of concern to Finra,” the agency said.
Materials that would need to be filed with Finra include web pages that promote the offering, slide presentations, pitch decks, one-page “teasers,” fact sheets, sales brochures, executive summaries, and investor packets.
Finra said it proposed the amendments due to its concern that the current rules do not fully identify the “offering documents” that firms are required to file with the agency as a result of their private placement rules.
Accordingly, the proposal is designed to ensure that all key private placement materials that are furnished to retail investors are also sent to Finra.
The agency also said it believes that this information will give its regulators a more complete picture of the information and documents that have been furnished to retail investors.
Under the rule proposal, any “retail communication” as defined in Finra Rule 2210 used in connection with the offering would be subject to the filing requirements.
Finra said it anticipates that members would be able to file most retail communications at the same time and in the same manner that they file their other offering documents.