06/17/2009
SEC approves FINRA proposal to amend NASD Rule 2720 re conflicts of interest
By Cydney Posner The SEC has approved the
FINRA proposal regarding conflicts of interest. (See the
post on 5/14/09 describing the proposal.) The new rule will, among other things:
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Exempt from the filing and qualified independent underwriter ("QIU") requirements public offerings of investment-grade rated securities, public offerings of securities that have a bona fide public market, and public offerings in which the member primarily responsible for managing the offering does not have a conflict of interest and can meet the disciplinary history requirements for a QIU;
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Amend the definition of "conflict of interest" to include public offerings in which at least five percent of the offering proceeds are directed to a participating member or its affiliates;
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Modify the Rule's disclosure requirements to provide more prominent disclosure of conflicts of interest in the offering documents;
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Amend the Rule's provisions regarding the use of a QIU to eliminate the requirement that the QIU render a pricing opinion;
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Amend the QIU qualification requirements to focus on the experience of the firm rather than its board of directors;
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Prohibit a member from acting as a QIU if it would receive more than five percent of the proceeds of an offering; and
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Lengthen from five to ten years the amount of time that a person involved in due diligence in a supervisory capacity must have a clean disciplinary history.