By Cydney Posner

The SEC has approved the FINRA proposal regarding conflicts of interest. (See the post on 5/14/09 describing the proposal.) The new rule will, among other things:
  • Exempt from the filing and qualified independent underwriter ("QIU") requirements public offerings of investment-grade rated securities, public offerings of securities that have a bona fide public market, and public offerings in which the member primarily responsible for managing the offering does not have a conflict of interest and can meet the disciplinary history requirements for a QIU;
  • Amend the definition of "conflict of interest" to include public offerings in which at least five percent of the offering proceeds are directed to a participating member or its affiliates;
  • Modify the Rule's disclosure requirements to provide more prominent disclosure of conflicts of interest in the offering documents;
  • Amend the Rule's provisions regarding the use of a QIU to eliminate the requirement that the QIU render a pricing opinion;
  • Amend the QIU qualification requirements to focus on the experience of the firm rather than its board of directors;
  • Prohibit a member from acting as a QIU if it would receive more than five percent of the proceeds of an offering; and
  • Lengthen from five to ten years the amount of time that a person involved in due diligence in a supervisory capacity must have a clean disciplinary history.

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