FINRA Publishes Regulatory Notice 23-08: Reminding Members of Obligations and Seeking Feedback on Private Placements

 FINRA has published Regulatory Notice 23-08 to remind its members of their obligations when selling private placements, which are unregistered offerings sold under the Regulation D safe harbors of the Securities Act of 1933. The notice updates and supplements previous guidance based on the evolving market and regulatory landscape. It emphasizes the obligation of members to conduct reasonable investigations of securities they recommend and addresses filing requirements, communications with the public, and supervision rules related to private placements. The notice does not introduce new legal or regulatory requirements and does not relieve firms of existing obligations. Additionally, FINRA has issued a companion notice, Regulatory Notice 23-09, seeking comment on potential changes to enhance the capital-raising process while maintaining investor and issuer protections. FINRA encourages members to provide feedback on that notice.

The publication of Regulatory Notice 23-08 by FINRA appears to be a reminder to its members about their obligations when selling private placements. It indicates that the market for unregistered offerings and the regulatory landscape have evolved since the previous notice was published, and FINRA has observed areas of concern and effective practices in the sales of private placements.

The notice emphasizes the obligation of members to conduct reasonable investigations of the securities they recommend and highlights the importance of compliance with SEC Regulation Best Interest and FINRA Rule 2111 regarding suitability standards. It also addresses filing requirements, communications with the public, and supervision rules related to private placements. It's worth noting that the notice does not introduce new legal or regulatory requirements but rather provides guidance and updates based on developments and observations. It encourages members to consider the information when developing or modifying their practices to ensure compliance with relevant regulatory obligations.

Additionally, FINRA has issued a companion notice, Regulatory Notice 23-09, soliciting feedback on potential changes to enhance the capital-raising process while maintaining investor and issuer protections. This indicates that FINRA is open to input from its members and stakeholders on how to improve the process. Overall, the notice and the request for comment demonstrate FINRA's commitment to ensuring that its members uphold their obligations and comply with regulatory requirements when dealing with private placements, while also seeking input on potential enhancements to the capital-raising process.

FINRA Regulatory Notice 23-08 is a publication by the Financial Industry Regulatory Authority (FINRA) that serves as a reminder to its members about their obligations when selling private placements. It specifically focuses on unregistered offerings conducted under the Regulation D safe harbors of the Securities Act of 1933. The notice updates and supplements previous guidance provided by FINRA, taking into account the evolving market and regulatory landscape. It highlights the duty of members to conduct reasonable investigations of the securities they recommend, in line with antifraud provisions of federal securities laws and obligations under SEC Regulation Best Interest and FINRA Rule 2111 (Suitability). The notice also addresses additional obligations related to filing requirements, communications with the public, and supervision rules. It clarifies that the notice does not introduce new legal or regulatory requirements and encourages members to consider the information when developing or modifying their practices for compliance. FINRA has also issued a companion notice, Regulatory Notice 23-09, seeking feedback on potential changes to enhance the capital-raising process without compromising investor and issuer protections.

FINRA Regulatory Notice 23-08 is a notice from FINRA, an organization that oversees securities firms, reminding its members about their responsibilities when selling private placements. Private placements are investments that are not publicly registered and are offered under certain rules.

Think of it like this: imagine you have a friend who wants to start a small business and asks you for money to invest in it. If you decide to give them the money, that would be a private placement.

The notice emphasizes that when brokers recommend these private placements to their clients, they have a duty to do a reasonable investigation of the investment. This means they need to make sure it's a legitimate opportunity and suitable for their clients' needs. The notice also talks about other things brokers need to do, like following filing requirements, being honest in their communications with the public, and having proper supervision.

It's important to note that this notice doesn't create new rules or change existing ones. Instead, it updates previous guidance based on changes in the market and regulations. In addition to this notice, FINRA has also asked its members for feedback on how to make the process of raising capital (getting money for investments) better while still protecting investors and issuers (the companies offering the investments). This shows that FINRA is open to suggestions on improving the system.