Exam Alert: FINRA changes process for filing notice and information on Regulation M distributions

FINRA is implementing an electronic filing system for the submission of notice and other information required by FINRA rules for distributions subject to Regulation M. Effective June 4, 2012, firms will be required to use the new system, and the current forms for filing notice and other information on Regulation M distributions will no longer be used. Continue reading

FINRA is implementing an electronic filing system for the submission of notice and other information required by FINRA rules for distributions subject to Regulation M.  Effective June 4, 2012, firms will be required to use the new system, and the current forms for filing notice and other information on Regulation M distributions will no longer be used.

Regulation M was put in place to prevent market manipulation by those involved in the distribution of a security.  Covered, non-excepted securities are subject to a restricted period, during which time the distribution participants may not purchase the security, with certain exceptions (such as passive market making and stabilizing activities).

FINRA requires firms acting as manager in a distribution subject to Regulation M to file written notice that includes a determination as to the length/applicability of the restricted period and details on the pricing of the distribution, including the security name and symbol, the type of security, the number of shares offered, the offering price, the last sale before the distribution, the pricing basis, the SEC effective date and time, the trade date, and identification of the distribution participants and affiliated purchasers.  FINRA also requires written notice of penalty bids and syndicate covering transactions in OTC equity securities.

ADF Market Makers must submit written notice of withdrawals of quotations during the restricted period.  Under FINRA trade reporting rules for OTC equity transactions, firms must provide notice and information to FINRA when they use an exception to the trade reporting requirements for transactions that are part of an “unregistered secondary distribution.”

Sources:

FINRA Regulatory Notice 12-19

Regulation M Filing

FINRA Rules 5190 and 6275

This alert applies to the Series 24, Series 79, and Series 7.

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