Series 14: 6.2.1.1. Member Firm Private Placements

6.2.1.1. Member Firm Private Placements

A broker-dealer is of course a business, and as such may conduct a private placement of its own shares. A member private offering (MPO) is a private placement of unregistered securities issued by a FINRA member or a control entity. A control entity is any entity that controls or is controlled by the member firm. In this case, control means a beneficial interest of 50% of the outstanding voting securities.

Because of the heightened conflict-of-interest concerns inherent in an MPO, the broker-dealer must follow additional rules above and beyond those that apply to other private placements. FINRA imposes the following requirements on MPOs:

• If an offering has a private placement memorandum (PPM) or term sheet, it must be provided to each prospective investor and must contain disclosures addressing the intended use of the offering proceeds, the offering expenses, and the amount of selling c