New FINRA Rules Facilitate Public Plan Solicitation and Distribution Activities
The SEC has approved new FINRA rules allowing Capital Acquisition Brokers to engage in distribution and solicitation activities for registered investment advisers consistent with the anti-pay-to-play rules. Rule 206(4)-5 of the Advisers Act restricts advisers from engaging solicitors for certain government entities. The new rules allow advisers to retain CABs consistent with previously adopted FINRA rules governing distribution and solicitation activities. CABs are limited purpose FINRA member firms that are subject to less regulation but must limit their activities to investment banking-type activities such as advising companies on capital raising and acting as a placement agent.
OUR TAKE: These rules allow government plan solicitors to continue their activities on behalf of RIAs by submitting to the lighter CAB regulatory regime. These rules represent a loosening of the rules that appeared very restrictive in the wake of Rule 206(4)-5’s adoption.