Quick Answer
FINRA excludes 14 categories of private placements from the private placement notice filing requirement, mostly offerings sold solely to institutional or sophisticated buyers, offerings already regulated another way, or offerings the member already filed with FINRA under a different rule. A member can also ask FINRA directly for a case-by-case exemption by showing good cause.
Every category on this list has a boundary. The institutional-buyer category, the largest one, requires the offering to be sold solely to the listed purchaser types; mixing in even one buyer who doesn't qualify removes the exemption for the entire offering.
Which Offerings Are Exempt From Filing?
| Exemption category | What it covers |
|---|---|
| Sold solely to institutional or sophisticated buyers | Institutional accounts, qualified purchasers, qualified institutional buyers (QIBs), investment companies, an entity made up entirely of QIBs, banks, employees and affiliates of the issuer, knowledgeable employees, eligible contract participants, or accredited investors in four categories only. First, banks, registered broker-dealers, insurance companies, registered investment companies and certain large employee benefit plans. Second, private business development companies. Third, entities holding over $5,000,000 in assets that were not formed to buy into this offering. Fourth, trusts holding over $5,000,000, also not formed for that purpose, whose purchases a sophisticated person directs |
| Already-exempted securities | Securities that already carry exempted-security status under the Exchange Act |
| Institutional resale or Regulation S offerings | Offerings made under the QIB private resale safe harbor or Regulation S |
| Short-term institutional debt | Short-term commercial paper that the Securities Act exempts as a security, plus privately placed debt maturing in 397 days or less and issued in minimum $150,000 denominations |
| Subordinated loans | Offerings of subordinated loans that satisfy the net capital rule's Appendix D |
| Variable contracts | Variable annuity and variable life insurance contracts (variable products) |
| Modified guaranteed contracts | Modified guaranteed annuity contracts and modified guaranteed life insurance contracts |
| Non-convertible debt or preferred securities | Securities meeting the eligibility criteria for registering primary offerings on Forms S-3 or F-3 |
| Conversions, stock splits, and restructurings | Executed by an already-existing investor without additional consideration or investment |
| Commodity pool offerings | Offerings of securities of a commodity pool operated by a commodity pool operator |
| Business combination transactions | Reclassifications, mergers or consolidations, and asset transfers put to a security-holder vote, plus exchange offers |
| Registered investment company offerings | Offerings of registered investment companies |
| Standardized options | Standardized (listed) options |
| Offerings already filed with FINRA | Offerings the member already filed with FINRA to satisfy a different applicable FINRA filing requirement, or that are exempt from that other requirement |
Exam Tip: Gotchas
- "Solely" means all-or-nothing. An offering sold to nine QIBs and one retail investor doesn't qualify for the institutional-buyer exemption at all; every buyer has to come from the qualifying list.
- These exemptions relieve only the FINRA filing requirement. They don't exempt the offering from the Securities Act registration exemption it already relies on, and they don't relieve the member of any other FINRA obligation tied to the sale.
What Is the Individualized Exemption?
- Separate from the categorical list above, a member may apply directly to FINRA for an exemption from this filing requirement, and FINRA may grant that relief to the member or to an associated person for good cause shown. The written application is the member's; an associated person is named in it only as the primary contact.
- The member must show good cause. FINRA decides through its formal exemptive-relief process rather than granting the exemption automatically.
Exam Tip: Gotchas
- The individualized exemption isn't automatic like the categorical list. FINRA reviews and grants it case by case, only for good cause shown, so it isn't a fallback a member can simply claim.
What Should You Check on Exam Day?
- Confirm whether every buyer in a fact pattern fits the qualifying list before applying the institutional-buyer exemption; one non-qualifying buyer defeats it.
- Count on this being a closed list. If a scenario describes a category not on the list, the offering isn't exempt from filing.
- Remember an exemption from filing never means an exemption from the offering's own underlying registration exemption.
- Distinguish the categorical exemptions (automatic once the facts fit) from the individualized exemption (requires an application and good cause).