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FINRA Seeks Comment on Capital Raising, Underwriting, Research Reports

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As part of its FINRA360 initiative, the Financial Industry Regulatory Authority issued three requests for comments Wednesday on the capital formation process, proposed amendments to rules for underwriting arrangements and a proposed safe harbor from equity and debt research rules for desk commentary.

All three proposals seek to clarify the requirements for FINRA member firms engaged in the capital formation process.

Regulatory Notice 17-14 seeks comment on all of FINRA’s existing rules, operations and administrative processes that address the capital-raising activities of its member firms, including recent additions regarding capital acquisition brokers and funding portals.

Regulatory Notice 17-15, requests comment on proposed amendments to modernize, simplify and clarify FINRA Rule 5110. The rule applies to underwriting terms and arrangements regarding the public offering of securities.

Regulatory Notice 17-16 clarifies the application of FINRA’s research rules to desk commentary by sales and trading and principal trading personnel and solicits comments on a proposal to create a limited safe harbor for eligible desk commentary that may rise to the level of a research report. The proposed safe harbor would be subject to a number of compliance conditions to mitigate research-related conflicts.

Comments on the Notices are due by May 30.

“A vibrant capital-raising process supports the growth of the large and small businesses that create jobs and strengthen the economy. Broker-dealers perform a critical role in that process,” said FINRA President and CEO Robert Cook, in a statement. “As the environment for capital raising evolves, it is essential that we continue to assess how regulation can best facilitate capital formation on a strong foundation of investor protection and market integrity.”

The FINRA360 initiative is the self-regulator’s program to conduct a comprehensive review of its operations and programs.


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