FINRA has filed SR-FINRA-2026-002 with the SEC, proposing amendments to two rules that matter significantly to firms engaged in capital formation activities: Rule 5110 (the Corporate Financing Rule covering underwriting terms and arrangements) and Rule 5123 (Private Placements of Securities). If your firm touches either side of that business, pay attention.
What's Being Proposed
The filing targets both the underwriting compensation framework under Rule 5110 and the private placement disclosure and filing requirements under Rule 5123. While the full text of the proposed amendments will clarify the specific line-item changes, FINRA rule filings in this space typically address pain points that have emerged from years of implementation — compensation calculation complexities, filing timing issues, and definitional ambiguities that create compliance friction.
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Rule 5110 has been a source of ongoing compliance burden since its 2020 overhaul. Firms have struggled with compensation tracking, particularly around non-cash items and the lookback provisions. Rule 5123's filing requirements for private placements have similarly generated questions about timing, exemptions, and what constitutes a material change requiring an amended filing.
Why This Matters Operationally
For firms with active corporate financing or private placement desks, these rules sit at the intersection of business development and compliance. Get them wrong, and you're looking at potential enforcement exposure and, more immediately, delays in closing deals while you sort out filing deficiencies.
The practical impact depends on what FINRA is actually changing:
- If they're simplifying compensation calculations under 5110: Your deal teams may have more flexibility, but your compliance procedures will need updates to reflect new methodologies.
- If they're adjusting 5123 filing timelines or exemptions: Your private placement workflow and checklist need revision before the effective date.
- If they're clarifying definitions: Review your current interpretations against the new language. What you've been doing may or may not align.
What You Should Do Now
First, read the actual filing when the full text becomes available. FINRA rule filings include detailed explanations of the regulatory intent and specific language changes. Don't rely on summaries.
Second, map the proposed changes against your current written supervisory procedures for corporate financing and private placements. Identify gaps early.
Third, if your firm comments on rule proposals — and more firms should — this is your window. FINRA does read comment letters, and practical operational feedback from member firms shapes final rules more than you might expect.
Timeline Considerations
This is a proposed rule change, not an effective rule. The SEC review process takes time, and FINRA may revise the proposal based on comments. But waiting until final approval to start your compliance review is a mistake. Begin your gap analysis now so you're ready to implement when the rule becomes effective — not scrambling after.
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Key Takeaways
When do these proposed rule changes take effect?
They don't — yet. SR-FINRA-2026-002 is a proposed rule change filed with the SEC. It must go through the SEC approval process, which includes a comment period. Effective dates will be specified in the final rule approval.
Do I need to file comments on this proposal?
You're not required to, but if the current rules create operational problems for your firm, this is your opportunity to provide input. FINRA considers member firm feedback during the rulemaking process.
Should I update my WSPs now or wait for final approval?
Start your gap analysis now. Identify which sections of your written supervisory procedures address Rules 5110 and 5123. Don't make changes until the rule is final, but be ready to implement quickly once it is.
The content in this blog is for informational purposes only and does not constitute legal advice, regulatory guidance, or an offer to sell or solicit securities. GiGCXOs is not a law firm. Compliance program requirements vary based on business model, customer base, and regulatory classification.