FINRA Capital Formation Review


On Apr. 12, FINRA proposed rules on capital, underwriting, research.


  • Consulted on rules relating to participation of member firms in capital-raising process.
  • Part of efforts to modernize regulation of activity, while maintain investor protections.
  • Followed FINRA CEO Cook Jan. 2017 speech, on a review of transparency, see #30601.
  • Under new FINRA360 initiative to evaluate various aspects of operations and programs.
  • FINRA issued three regulatory notices, on rules relating to capital formation activities.
  • Capital Formation Notice 17-14
  • Sought comment on functioning of rules that directly relate to capital-raising process.
  • Rules include underwriting public offerings, advising on capital raising, restructurings.
  • Placement agents for sale of unregistered securities, funding portals, research reports.
  • Included recent rule additions, covering capital acquisition brokers and funding portals.
  • Asked of unintended consequences arising from rules related to capital-raising process.
  • Underwriting Notice 17-15
  • Proposal is intended to modernize FINRA Rule 5110, and simplify and clarify provisions.
  • Retain principle that firm or associate not participate in public offering if unfair terms.
  • Or where terms, conditions, compensation, unreasonable or inconsistent to FINRA rules.
  • Research Harbor Notice 17-16
  • Amended Rule 2241 on research analysts, reports, Rule 2242 on debt research analysts.
  • To create a safe harbor for a brief, written analysis distributed to institutional investors,
    by a sales or principal trader, but may rise to level of research report/desk commentary.
  • Safe harbor conditions compliance with provisions to mitigate research-related conflicts.
  • Require health warning on commentary and obtain investor negative consent to receive.
  • Effectiveness
  • Comments on all three notices requested by May 30, 2017, before further actions taken.
  • In May 2017, FINRA CEO Cook spoke on changing role in evolving challenges, see #32301.
  • On May 24, 2017, FINRA extended comment period on three notices, until Jul. 14, 2017.

Regulators FINRA
Entity Types B/D; Corp
Reference Capital RN 17-14, PR, 4/12/2017; Underwriting RN 17-15, 4/12/2017, Rule 5110; Research RN 17-16, 4/12/2017, Rule 2241, Rule 2242; JOBS
Functions Trading; Research; Advertising; Compliance; Financial; Legal; Operations; Registration; Reporting
Countries United States of America
Products Equity; Fixed Income; Investment Bank; Issuance/IPO; Securities
Regions Am
Rule Type Proposed
Rule Date 4/12/2017
Effective Date 7/14/2017
Rule Id 31856
Linked to N/A
Report Issue 6/1/2017
Report Section US Investment

Last substantive update on 05/24/2017