FINRA Cracks Down On Private Placements

Earlier this year, FINRA announced that the policing of private placements would be its regulatory priority for 2013.  However, FINRA enforcement actions relating to private placements have been dramatically increasing since 2010, as the chart below indicates. With the adoption of FINRA Rule 5123 (requiring broker-dealers to file with FINRA copies of offering documents used in certain private placements), this trend of increased enforcement seems likely to continue.

Recent FINRA enforcement actions suggest that FINRA is actively pursuing its 2013 regulatory priority and indicate the types of violations that are likely to draw the SRO's attention, including:

• Disclosing investment objectives that exceed or fail to accurately capture the objectives stated in the offering documents;