FINRA Seeks to Make Form 211 Information Publicly Available


Securities Lawyer 101 Blog

FINRA is soliciting comment on its proposal to make publicly available through FINRA’s website a repository of Form 211 information. Firms are required to complete FINRA’s Form 211 to demonstrate compliance with the specific information review requirements under SEA Rule 15c2-11 prior to initiating a quotation in a non-exchange-listed security. Comments to the proposals must be received by September 2, 2014.

Rule 15c2-11 prohibits a firm from publishing a quotation for a non-exchange-listed security unless the firm has reviewed certain information about the issuer whose security is the subject of the quotation and believes this information to be accurate and obtained from a reliable source.

Firms must demonstrate compliance with Rule 15c2-11 by completing and filing a Form 211 with FINRA at least three business days before the firm’s quotation is published or displayed in the quotation medium. Presently, Form 211 submissions are not publicly available to shareholders or investors.

FINRA points out in its proposal that there is also no process by which investors, firms, issuers or other parties may request from FINRA copies of a cleared Form 211.  The lack of availability of Form 211 has provided corporate hijackers and fraudsters with a secret venue to hide improper corporate actions and takeovers that might otherwise be discovered by legitimate shareholders and investors.

Having such information publicly available would enable the public to conduct proper due diligence and would provide transparency to investors by establishing a public website repository where investors can review Form 211 information for issuers that are not reporting companies for which there may be very little public information available to investors.

FINRA believes that access to the information included on Form 211 will assist the public in understanding the range and sources of information that may be available for a particular issuer and serve as a useful supplementary research tool.

We agree with FINRA in this regard and believe that all exhibits and supplemental information including legal opinions should be publicly available.  During the going public process, FINRA frequently comments and requires sponsoring market makers and issuers to provide responses before approving an initial Form 211. Because comments and responses are part of the Form 211 approval process, such items should also be made publicly available so that investors have complete  information.  This is particularly important where Form 211 information is deficient and material information is provided supplementally to FINRA upon request.

FINRA specifically requests comment concerning the following issues:
  • Who or what entities would be interested in Form 211 information? What is the level of interest in Form 211 information?
  • What are the benefits of making Form 211 information publicly available? FINRA welcomes estimates on the number of investors who are anticipated to access and use Form 211 information.
  • What are the potential uses of Form 211 information to investors and other market participants? FINRA seeks comment on the format (e.g., Form 211 scans, downloadable data files) in which Form 211 information should be made accessible through the repository.
  • Are there specific concerns by firms, issuers, investors or other parties regarding FINRA providing public access to Form 211 information?
  • Should all Form 211 information be provided in the repository or certain parts omitted or redacted? If the latter, which parts should be omitted or redacted and why?
  • Should any attachments (or links to the attachments, where available) that accompany a Form 211 also be made accessible through the repository?
  • Should a firm’s supplemental submissions in connection with a Form 211 filing be included as part of the Form 211 information repository? For example, a firm may submit additional documentation subsequent to its initial Form 211 filing in response to FINRA staff comments or to change its request for clearance to quote from an unpriced quotation to a priced quotation.
  • Are there risks associated with making non-current information available to investors through the repository? If so, should there be prominent disclosure to investors and other potential users of the website that the Form 211 information may be stale and, therefore, users should conduct further research on the issuer and security to assess whether additional and more current information is available?
  • Should the Form 211 be removed from the repository after a certain period of time or flagged to highlight that the information contained may be stale (e.g., after six months from the date of clearance)?
  • Should FINRA consider adopting a requirement that firms file periodic updates to Form 211 information? If so, at what intervals should updating be required? In addition,  should all of the applicable original Form 211 items of information be subject to the updating requirement? 

For further information about the Form 211 process or this securities law blog please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202N, Boca Raton, Florida, (561) 416-8956, [email protected] or visit www.securitieslawyer101.com. This  blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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https://www.securitieslawyer101.com