On November 6, the Financial Industry Regulatory Authority (FINRA) released Notice to Members 17-37, which provides information about the Pay-to-Play rule applicable to capital acquisition brokers (CABs). The SEC’s pay-to-play rules prohibit an investment adviser and its covered associates from providing or agreeing to provide payment to any person to solicit a government entity

On September 29, the Securities and Exchange Commission approved the rule proposal of the Financial Industry Regulatory Authority to subject capital acquisition brokers (CABs) to the same pay-to-play restrictions already applicable to non-CAB member firms. As explained in more detail in this Katten advisory, CABs are FINRA members that are engaged in a limited range of broker-dealer activities, such as advising firms on capital raising and corporate restructuring or acting as a private placement agent to institutional investors (subject to certain conditions). CABs elect to be treated as such and are subject to a separate set of streamlined FINRA rules.
Continue Reading SEC Approves FINRA Rule Change to Subject Capital Acquisition Brokers to Pay-to-Play Rules

On August 25, the Securities and Exchange Commission (SEC) issued notices (Notices) to the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board (MSRB and together with FINRA, SROs) stating that it intends to approve pay-to-play rules proposed by both. In the Notices, the SEC elaborated that the proposals impose substantially equivalent or more stringent restrictions than the SEC’s existing pay-to-play rule. Because the SEC already has a pay-to-play rule (17 CFR 275.206(4)-5 (Rule 206(4)-5)), the SROs cannot pass their own separate pay-to-play rules unless the SEC approves them.
Continue Reading SEC To Approve FINRA and MSRB Pay-To-Play Rules