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Regulation and Compliance > Federal Regulation > FINRA

Private Placements: FINRA Guidance

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Regulatory Notice 10-22 says that although Reg. D, “provides exemptions from the registration requirements of Section 5,” of the Securities Act of 1933, these transactions are “not exempt from the antifraud provisions of the federal securities laws.”

A broker/dealer (B/D) has a duty “to conduct a reasonable investigation of securities that it recommends, including those sold in a Regulation D offering.” They must also meet suitability requirements, and SEC and FINRA supervisory and advertising rules.

The notice includes scope of responsibility for B/Ds regarding private placements and a section on “best practices.” This includes “the scope of a BD’s responsibility to conduct a reasonable investigation will necessarily depend upon its affiliation with the issuer, its role in the transaction, and other facts and circumstances of the offering, including whether the offerees are retail investors or more sophisticated institutional investors.”

Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.


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