SEC Ponders FINRA Tweaks to Underwriting Fees and Private Deals
Published Date: 4/28/2026
Notice
Summary
FINRA wants to update rules about how companies handle fees and securities when raising money. These changes affect brokers and investors by clarifying how certain securities are valued and expanding who can invest in private deals. The SEC is now deciding whether to approve these updates by April 30, 2026, which could impact how deals are priced and who gets to join in.
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Analyzed Economic Effects
6 provisions identified: 5 benefits, 1 costs, 0 mixed.
New Market-Price Valuation Rule
FINRA would change how securities acquired by participating members and treated as underwriting compensation are valued. Instead of relying on a ‘‘bona fide public market’’ test, the value would be based on the closing market price on a registered national securities exchange or a designated offshore securities market on the date of acquisition.
Debt-for-Equity Exchange Exclusion
FINRA would add an exclusion so that equity acquired by an affiliated lender in a debt-for-equity exchange would not be deemed underwriting compensation if (1) the affiliated member subsequently offered all acquired equity in a firm commitment offering, (2) terms were set at arm's length based on the market price of the equity, and (3) customary compensation was negotiated for the subsequent equity offering.
Capital Investment Exclusion for DPPs and REITs
FINRA would add a self-operating exclusion so capital investments by participating members in Direct Participation Programs (DPPs) and unlisted REITs are not treated as underwriting compensation if: the investments are disclosed in the prospectus; the offering and capitalization transactions are valued and priced based on net asset value (NAV); the offering is subject to Rule 2310; and the securities are restricted for 180 days after sales commence.
Private Placement Filing Exemption Expanded
FINRA would expand Rule 5123's filing exemption to include offerings sold to (1) entities owning investments in excess of $5,000,000 that are not formed to acquire the offered securities and (2) family offices with assets under management over $5,000,000 that meet the knowledgeable-person direction requirement. This aligns Rule 5123 with the SEC's 2020 accredited investor definition amendments.
Non-Convertible Preferred Treated Like Debt
FINRA would amend Rule 5110 to treat non-convertible preferred securities comparably to non-convertible debt securities for purposes of the Rule 5110 exclusion, provided the non-convertible preferred securities are acquired at a fair price.
Tail Fees Subject to Termination Fee Rules
FINRA would clarify that ‘‘tail fees’’ negotiated in engagement letters are comparable to termination fees or rights of first refusal and therefore must meet the same Rule 5110 requirements; if they do not, tail fees would be unreasonable arrangements under the rule.
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