FINRA has posted its new COBRADesk Same Day Clearance Guide, which walks filers through the same day clearance process on a step-by-step basis and includes a number of FAQs related to the new process located at the end of the Guide, as noted in Corporate Counsel. Same Day Clearance, which became available on March 1, 2010, is a process allowing filers that anticipate participating in a public offering within a short time frame to obtain a no-objections notification within the same day of submitting a shelf filing. The procedure is intended for accelerated shelf offering transactions, such as overnight pricing transactions, Multi-Jurisdictional Disclosure System (MJDS) offerings, and any other shelf-registered securities offerings anticipated shortly after submission of a FINRA filing.

Under the procedure, filings accepted between 9 am and 4 pm will receive a no-objections notification on that same day. Filings accepted after 4 pm will receive notification on the following business day. FINRA staff will still conduct a review of the offering, but it will be a post-offering review after the final offering documents have been filed. In most cases, however, filers will not receive comments or be contacted by the staff. For minor issues, the staff will contact filers telephonically to provide an opportunity for filers to modify the filings. In the event significant compliance issues are identified, the staff may refer the matter to FINRA's investigative unit for further review and consideration.

Although FINRA will respond to general questions, do not expect any hand holding for specific transactions: pre-filing assistance concerning specific transactions may be limited over the phone and the staff will not be able to review an offering over the phone before it is filed. If additional assistance is required from the staff, a standard filing should be submitted instead of the SDC option. Questions related to COBRADesk submissions should be directed to the Compliance staff at the Department's main line (240) 386-4623.

FINRA notes that anyone choosing the SDC filing option should be confident that the representations made are accurate and the arrangements entered into by members will comply with FINRA rules at the time of participation.

To obtain SDC, filers must represent, for base filings, that the aggregate compensation to be received by FINRA members will not exceed 8% of the offering proceeds and that, in the event Rule 2720 (related to conflicts of interest) applies, that the offering documents will contain prominent disclosure as required in the rule.

To obtain SDC for takedown filings, also referred to as a "Child Deal," members and their counsel are required to provide the name of a registered principal of the FINRA member on whose behalf the filing is made and to agree with the following statements:

  • Terms and arrangements entered into by FINRA members and the issuer are consistent with Rule 5110(f)(2).
  • All items of value will be disclosed in the offering documents, the aggregate of which will not exceed 8% of the offering proceeds.
  • A statement that participating FINRA members have not acquired any unregistered securities during the 180-day period preceding the current filing that would be considered underwriting compensation.
  • In the event that Rule 2720(a)(2) applies, the qualified independent underwriter was approved during the preceding 12-month period.
  • An undertaking that all the final documents and any other documents entered into by FINRA members, such as engagement letters will be submitted for post-offering review and the "issuer-managed" screen will be updated with the final offering details.

The base and takedown filings may be submitted concurrently to obtain both a conditional no-objections notification for the base registration statement and a 415 no-objections notification for the specific takedown. However, this option should be used only if the takedown is expected to occur within a few days. If not, FINRA recommends making the SDC filing for the base and then waiting to submit the takedown filing until the transaction is close to pricing.

If there is a potential for a Rule 2720 conflict in a shelf takedown, the filing will still be eligible for SDC so long as prominent disclosure is provided in the offering documents and, in the event a Qualified Independent Underwriter (QIU) is engaged, the FINRA member acting as a QIU has been approved during the 12-month period prior to the SDC filing. The procedure for approval is described in the FAQs.

If FINRA members have received or will receive unregistered securities (e.g., warrants) within the review period (180 days prior to filing through 90 days following effectiveness) that would be deemed underwriting compensation, the SDC option would not be available. If securities would be part of the member's compensation, a standard filing would be required, even If the arrangement were similar to one previously approved by FINRA.

Filers will need to complete all available screens, such as "Supplemental," "Corporate Compliance" and "Compensation," as in a traditional filing. If this information is not provided at the time of the initial filing, the filing may be accepted and the no-objections notification may be generated, but the information will be requested during the post-offering review. Filing fees must be paid within 48 hrs of filing the base prospectus through COBRADesk.

If the prosupp is not yet final, filers will not be required to complete the "Takedown/Issuer-Managed/Selling Securityholders" screen in COBRADesk with the maximum number of securities to distribute. However, filers are expected to amend the filing at a later time to provide this information once a prosupp is filed with the SEC. Rule 5110(b)(4)(A)(i) provides that the prosupp should be filed with the Corporate Financing Department no later than one business day after it is filed with the SEC. Note that changes can be made to update documents and provide additional information even after a conditional no-objections opinion or takedown no objections opinion is received.

SDC can still be used for shelf offerings even if the filings were originally submitted prior to the availability of SDC in COBRADesk (e.g., old base prospectus with a new takedown). The type of filing and the manner in which it is submitted will vary depending on the party that submitted the filing and the type of filing, as described in the FAQs.

Note that WKSI filings are not considered SDC filings, but are still reviewed on an expedited basis. The representations required in COBRADesk for WKSIs are different from those required in SDC filings. Filers should submit a WKSI filing by selecting "WSKI issuer" in COBRADesk.

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