DPP Allowed Expenses
Regarding DPP offerings, FINRA has more specific guidelines as to the reasonableness of underwriting compensation. Organization and offering expenses are presumed to be fair and reasonable if:
• organization and offering expenses in which a member or an affiliate is a sponsor do not exceed 15% of the gross proceeds of the offering
• the total amount of all items of compensation does not exceed 10% of the gross proceeds of the offering
• no compensation will be paid to underwriters, broker-dealers, or affiliates out of the proceeds of the offering prior to their release from escrow
• no commissions or other compensation will be paid to any person who is engaged by a potential investor for investment advice in a DPP, unless that person is a registered broker-dealer or associated person
In addition, the program may not provide compensation of an indeterminate nature to FINRA member firms or their associated persons for sales or services in connection with a DPP’s distribution. Examples of this kind of prohibited payment include: