SEC Approves FINRA Rule Change to Adopt Interim Form

SECComing from the pages of Mondaq:

SEC Approves FINRA Rule Change to Adopt Interim Form for Funding Portals under the Crowdfunding Provisions of the JOBS Act

FINRA filed with the SEC a proposed rule change to adopt the Interim Form for Funding Portals (“IFFP”). The IFFP is an online form for prospective intermediaries that intend to apply for membership with FINRA as funding portals (“prospective funding portal members”) pursuant to Title III of the Jumpstart Our Business Startups Act (the “JOBS Act”). The SEC approved the rule proposal on January 11, 2013, effective immediately.

FINRA is inviting prospective funding portal members, on a voluntary basis, to submit information to FINRA using the IFFP until FINRA and the SEC adopt final rules with respect to registered funding portals.

FINRA had previously issued Regulatory Notice 12-34 requesting comment concerning rule changes FINRA should consider for the regulation of funding platforms (see “ FINRA Requests Comment in Advance of Proposing Rules for Crowdfunding Intermediaries“). At this time, FINRA has not yet proposed any such rules.

The information requested on the IFFP (a copy of which is attached to the FINRA filing) includes the following:

  • Contact information;
  • General information about the funding portal;
  • Information about ownership and the portal’s own funding;
  • Information about the prospective funding portal’s management, business relationships, business model and compensation.

Filers are also required to describe how they will address the requirements for funding portals under the JOBS Act, including investor education, reducing the risk of fraud, ensuring adherence to aggregate selling limits and protecting the privacy of information. The SEC and FINRA have not yet provided guidance regarding these requirements.

FINRA indicated that it will accord confidential treatment to the information the prospective funding portal members submit on the IFFP, and that prospective funding portal members are not bound by the responses indicated on the IFFP and will be permitted to change their responses on the final application form.

The SEC has requested comments on the rule change, which are due on or before February 8, 2013.

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