On May 9, 2023, FINRA issued Regulatory Notice 23-09 (the “Notice”), seeking comment on any modifications that could be made to FINRA’s rules, operations and administrative processes to further promote capital formation while maintaining investor protection.

In addition to the open-ended request, the Notice sets forth the following ten questions for commenters to consider: 

  • Are there any FINRA rules, operations or administrative processes that should be updated or amended to better facilitate capital raising in a manner that preserves investor protection?
  • Have FINRA’s rules covering the capital raising process effectively responded to the problem(s) they were intended to address?
  • What have been the economic impacts, including costs and benefits, arising from FINRA’s rules on the capital raising process? To what extent do these economic impacts differ by business attributes, such as size of the member or differences in business models? Can you provide quantitative information regarding any of these impacts?
  • Where have FINRA rules related to the capital raising process been particularly effective? Are there other rules or applications where a similar approach might enhance capital formation while maintaining investor protections?
  • What, if any, unintended consequences have arisen from FINRA’s rules related to the capital raising process? Have members changed their business models and practices in ways unintended by FINRA with a consequence to capital formation or investor protection in response to FINRA’s rules in these areas?
  • Are there other FINRA rules or practices not identified above that impact the capital raising process, such as rules related to the fixed income market (other than the amendments to FINRA Rule 11880)? If so, what has been your experience with these rules or practices?
  • Are there any ambiguities in the rules that FINRA should address to aid members’ compliance and enhance the capital raising process while ensuring investor protection concerns are addressed? Are there any other types of modifications to FINRA rules that should be considered? For example, can FINRA rules be modified to encourage the frequency of quotes, quoted prices or number of shares quoted for securities, particularly illiquid ones?
  • What changes have occurred in the market for capital formation since Regulatory Notice 17-14 that should prompt FINRA to consider amending its rules to better facilitate capital raising?
  • Can FINRA make any of its administrative processes or interpretations related to the capital raising process more efficient and effective? If so, which ones and how? Are there any such processes or interpretations that should be added?
  • Is there any additional data FINRA could provide to facilitate capital formation or to facilitate analysis of the regulatory framework?

Comments must be received by August 7, 2023. The full text of the Release is available here.