The U.S. Securities and Exchange Commission (“SEC”) recently approved a evised version of proposed FINRA Rule 5123 governing private placements of ecurities. The new rule re-quires Financial Industry Regulatory uthority “FINRA”) members to file certain information with the regulator regarding overed offerings, but exempts most types of offerings from its coverage. The practical effect of the new rule will be to marginally increase the burdens on FINRA members when selling private place-ments, such as private funds, to certain classes of accredited investors. FINRA has not yet established an effective date for the new rule.

Background

As originally proposed, the rule was highly controversial and not only generated significant industry pushback, but caused the SEC to issue a rare “Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change” after initially publishing the proposed rule for comment in the Federal Register. FINRA avoided possible disapproval of the proposed rule by eliminating the most controversial elements and adding exemptions to limit the scope of the rule.