Question

A registered representative wishes to sell interests in a private placement to her clients. The private placement is not being offered through her firm. If she will not be compensated for the transactions, which of the following statements are TRUE?

A) She must provide written notice to FINRA and her firm
B) She must provide written notice to her firm, but the firm does not need to provide her with written acknowledgment
C) Since she is not being compensated, she only needs to provide verbal notice to her firm
D) She must provide written notice to her firm and the firm must provide written acknowledgment and may require her to adhere to specified conditions

Answer 1

A registered representative must provide written notice to her firm if she wishes to sell interests in a non-firm private placement, even without compensation. The firm must acknowledge this in writing and may set conditions for her participation.

Step-by-step explanation:

When a registered representative wishes to sell interests in a private placement that is not being offered through her firm and without compensation, there are specific procedures that must be followed according to the regulations that govern such activities. In this scenario, the correct action is:

D) She must provide written notice to her firm and the firm must provide written acknowledgment and may require her to adhere to specified conditions.

This is in line with FINRA Rule 3280 (Private Securities Transactions of an Associated Person), which stipulates that an associated person must provide prompt written notice to their firm before participating in any private securities transaction, regardless of whether the person is receiving compensation. The firm then must assess the notice and decide whether to approve or disapprove the representative's participation in the private placement. The firm may also impose conditions on the representative's involvement in the transaction and is required to provide written acknowledgment of the notice.