FINRA Rule 5110

FINRA Filing and Review

• Many public offerings involving FINRA members must be filed with FINRA for review.
• FINRA reviews the underwriting arrangements before the offering proceeds.

Underwriting Compensation

• FINRA evaluates all compensation provided to underwriters, not just cash fees, such as:
  • stock;
  • warrants;
  • options; and
  • rights.
• Any compensation must be transparent, properly valued, and reasonable.

Unfair Terms Restrictions

• Excessive compensation and certain issuer-unfriendly contractual rights are prohibited or limited.
• FINRA seeks to prevent conflicts of interest and abusive deal terms.

Lock-Up Requirements

• Securities received as underwriting compensation are often subject to temporary transfer and sale restrictions.
• These restrictions are intended to reduce conflicts of interest and promote fair offering practices.