SEC and FINRA Approve Amendments to NASD Rule 2720 and FINRA Rule 5110
September 3, 2009
On June 15, 2009, the SEC published a release approving changes proposed by FINRA to amend and replace NASD Rule 2720, "Distributions of Securities of Members and Affiliates – Conflicts of Interest," and to make corresponding changes to FINRA Rule 5110, "Corporate Financing Rule – Underwriting Terms and Arrangements." Rule 2720 governs public offerings of securities in which a participating FINRA member has a conflict of interest. Rule 2720 is intended to address the potential conflicts arising in connection with diligence activities for and the pricing of such offerings, and the amendments are intended to streamline the application of Rule 2720’s requirements to such offerings. New Rule 2720, entitled "Public Offerings of Securities with Conflicts of Interest," will replace existing Rule 2720 in its entirety. On August 14, 2009, FINRA issued Regulatory Notice 09-49, announcing the Commission’s approval of the amendments to Rules 2720 and 5110. Pursuant to Notice 09-49, the amendments to Rules 2720 and 5110 will become effective on September 14, 2009.