Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 5110 (Corporate Financing Rule-Underwriting Terms and Arrangements) and 5123 (Private Placements of Securities)
Published Date: 1/30/2026
Notice
Summary
FINRA is updating two important rules that affect companies and investors involved in underwriting and private securities sales. The changes clarify how underwriting fees are valued, add some new exceptions, and expand who qualifies as an accredited investor for private placements. These updates aim to make things clearer and fairer, with no immediate cost changes, and they’re open for public comments starting early 2026.
Analyzed Economic Effects
5 provisions identified: 5 benefits, 0 costs, 0 mixed.
Simpler Valuation Using Exchange Prices
FINRA would change how securities that count as underwriting compensation are valued by allowing use of the closing market price on a registered national securities exchange or a designated offshore securities market on the date they are acquired. This is meant to make valuation more predictable and easier for participating members and issuers to apply during public offerings.
Debt‑for‑Equity Exchanges Not Penalized
FINRA would add an exclusion so that, under certain conditions, equity acquired by an affiliate of an underwriter in a debt-for-equity exchange would not automatically count as prohibited underwriting compensation. Conditions include a subsequent firm-commitment offering of those shares, arms‑length pricing based on market price, and customary compensation for the offering.
Capital Investments for DPPs and REITs Excluded
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 are valued and priced based on net asset value (NAV); the offering is subject to Rule 2310; and the acquired securities are restricted for 180 days after sales begin.
Non‑Convertible Preferred Treated Like Debt
FINRA would treat non-convertible preferred securities acquired by participating members at a fair price in a manner comparable to non-convertible debt for purposes of Rule 5110, meaning they can be treated as underwriting compensation with no compensation value if acquired at a fair price. If not received at a fair price, FINRA may attribute value based on the difference between fair price and actual price.
Private Placement Filing Exemption Expanded
FINRA would expand Rule 5123’s filing exemption to include (1) entities (not listed in certain Rule 501 paragraphs) that own investments in excess of $5,000,000 and (2) family offices with assets under management in excess of $5,000,000 that are not formed to buy the offered securities and whose prospective investment is directed by a knowledgeable person. Members selling only to these entities would not need to file private placement documents with FINRA.
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