June 18, 2025

Submitted via email to: [email protected]

Jennifer Piorko Mitchell
Office of the Corporate Secretary
FINRA
1700 K Street, NW
Washington, DC 20006-1506

Re: FINRA Regulatory Notice 25-06: FINRA Requests Comment on Modernizing FINRA Rules, Guidance and Processes to Facilitate Capital Formation

Dear Ms. Mitchell:
The Securities Industry and Financial Markets Association (“SIFMA” or “we”)1 appreciates the opportunity to respond to the request for comment by the Financial Industry Regulatory Authority, Inc. (“FINRA”) in Regulatory Notice 25-06 (“Regulatory Notice 25-06”),2 which requests comments on its rules and related guidance governing (i) corporate financings,3 (ii) research analysts and research reports, and (iii) capital acquisition brokers (“CAB”) and other limited purpose broker-dealers, in an effort to further facilitate capital formation. We note that SIFMA has also previously provided comment letters dated August 7, 2023, in response to Regulatory Notice 23-09 (“Regulatory Notice 23-09 Comment Letter”) and March 20, 2025, in response to Regulatory Notice 24-17 (“Regulatory Notice 24-17 Comment Letter”).4

This letter sets forth SIFMA’s (i) supplemental comments to FINRA Rule 5110 (Corporate Financing Rule—Underwriting Terms and Arrangements), FINRA Rule 5121 (Public Offerings of Securities With Conflicts of Interest), and FINRA Rule 5123 (Private Placements of Securities), with those set forth in our Regulatory Notice 23-09 Comment Letter and Regulatory Notice 24-17 Comment Letter, and (ii) proposed comments to FINRA Rule 5190 (Notification Requirements for Offering Participants) and the CAB rules. Attached hereto as Exhibit A and Exhibit B are proposed changes to FINRA Rule 5110 and FINRA Rule 5121, respectively, reflecting our comments noted below.

I. Introduction.

SIFMA supports FINRA’s ongoing efforts to review and consider changing its rules to increase efficiency and reduce unnecessary burdens on the capital raising process without compromising protections for investors and issuers. We acknowledge and appreciate the extensive effort FINRA has made over the years to meet with and hear from interested parties, including many of our members. Regulatory Notice 25-06 represents an important opportunity to continue to provide feedback on areas of regulation that may impede the capital formation process without the corresponding benefit of meaningful investor protection.
In this regard, SIFMA believes the modifications and clarifications to the rules detailed below are of significant importance to increasing the efficiency and effectiveness of FINRA’s regulation of capital formation while continuing to promote transparency, establish important standards of conduct for its members, and maintain appropriate protections for investors and issuers.5

II. The exemptions and exclusions from FINRA Rule 5110 requirements under FINRA Rule 5110(h) should be modified.

FINRA Rule 5110 governs the terms and conditions under which FINRA member firms may participate in public offerings of securities. Under FINRA Rule 5110(a)(2), all public filings in which a member participates must be filed with FINRA for its review and approval, subject to an available exemption or exclusion. As a general matter, FINRA Rule 5110(h)(1) exempts certain public offerings from the FINRA filing requirement of the rule, but not rule compliance, and FINRA Rule 5110(h)(2) excludes certain offerings from both filing and rule compliance.

2.1 FINRA should eliminate the “experienced issuer” condition to the FINRA filing exemption under FINRA Rule 5110(h)(1)(C) and (E).

FINRA Rule 5110(h)(1) sets forth an exemption from the FINRA filing requirement for the following transactions: (i) offerings of securities registered with the SEC on registration statement Forms S-3, F-3, or F-10, provided that the registrant is an experienced issuer; (ii) offerings of investment grade rated non-convertible debt securities and non-convertible preferred securities; (iii) securities offered by a bank, foreign bank, corporate issuer, foreign government, or foreign government agency that has outstanding unsecured non-convertible debt with a term of issue of at least four years or unsecured non-convertible preferred securities that are investment grade rated, or are outstanding securities in the same series that have equal rights and obligations as investment grade rated securities; and (iv) exchange offers where the company issuing securities qualifies to register securities with the SEC on registration statement Forms S-3, F-3, or F-10 and is an experienced issuer.

An “experienced issuer” is defined to mean an entity that has: (i) a reporting history of 36 calendar months immediately preceding the filing of the registration statement; and (ii) at least $150 million aggregate market value of voting stock held by non-affiliates; or alternatively the aggregate market value of the voting stock held by non-affiliates of the issuer is $100 million or more and the issuer has had an annual trading volume of such stock of three million shares or more. Form S-3, Form F-3, and Form F-10 are available to issuers that, inter alia, have a public float of at least $75 million and have been subject to applicable regulatory reporting requirements for at least 12 months and filed such reports in a timely manner. The experienced issuer definition effectively triples that public reporting standard (from 12 months to 36 calendar months) and doubles the public float standard (from $75 million to $150 million) for issuers to satisfy the FINRA filing
exemption under FINRA Rule 5110(h)(1)(C) and (E).
These heightened standards eliminate a category of issuers from relying on the FINRA filing exemption that are recognized by the SEC as having a level of standing and experience to qualify for issuing securities on Forms S-3, F-3, and F-10, which ultimately deters capital formation for these issuers due to (i) the additional time required for FINRA to review and approve the terms of their public offerings and (ii) the increased cost of transaction execution attributable to the FINRA
filing fee and related outside counsel fees and expenses.
As a result, we respectfully request that FINRA amend FINRA Rule 5110(h)(1)(C) and (E) to eliminate the experienced issuer condition.