ADISA Submits Comment Letter to FINRA Regarding Regulatory Notice 17-15

Jul 18, 2017

ADISA recently submitted a comment letter to FINRA regarding the Regulatory Notice 17-15: Corporate Financing to the FINRA Corporate Financing Rule 5110. ADISA believes that many of the proposed changes to the CF Rule will be beneficial to our members; however, the revisions are significant, and ADISA took the opportunity to provide comments on the following:

Extending Time Limits for Filings
ADISA commended FINRA for extending the time limits for filing public offerings from one business day to three business days.
Filing of Amended Documents
The Notice modifies the requirements with respect to filing amendments to documents to only require the filing of marked pages of those documents if there are “changes to the offering and the underwriting terms and arrangements.” ADISA believes this change makes it more confusing for a FINRA member and its counsel to determine whether to file marked pages to an amended document, and asked for a clarification with respect to FINRA’s intentions.
Disclosure of Aggregate Compensation
ADISA also commended FINRA for changing the disclosure requirements to only require the aggregate amount of all compensation to be disclosed, other than discounts and commissions, rather than requiring each category of compensation to be disclosed separately. Given the nature of our members’ offerings, it is difficult to estimate the exact amount to be allocated to each particular category of compensation, and an aggregate number should be sufficient to protect investor’s interests.
Changes to Lockup Restrictions
ADISA believes that “commencement of sales” can be more vague and hard to determine rather than a definitive dates of effectiveness. ADISA commented that the date of effectiveness should be a certain date that is publicly available on the SEC’s website. In addition, while a 180-day lockup period would be appropriate for an initial public offering, it does not appear that a 180-day lockup period would be appropriate with respect to follow on offerings. ADISA recommends a 30 to 45 day lockup period with respect to follow on offerings.
Regulation A+ Offerings
ADISA believes that FINRA should be more responsive to the review and clearance of filings made pursuant to Regulation A+. There must be a balance between impeding capital raising activities by issuers represented by competent counsel and protecting smaller, more unsophisticated issuers who are not so represented and could be harmed without FINRA’s oversight. Many ADISA members utilize Regulation A+ and believe that extensive and long reviews of those offerings have impacted their ability to effectively raise capital through the public markets.
The letter was authored by Deborah Froling of Kutak Rock and signed by ADISA President John Grady, DLA Piper. You can view the letter in its entirety here.