Recently, the National Association of Securities Dealers, Inc. (“NASD”) issued Notice to Members 07-27 soliciting comments from NASD members and other interested parties on proposed Rule 2721 that would regulate private placement offerings by a broker/dealer of its own securities, or those of a “control entity” of a broker/dealer (“Member Private Offerings”).  In the Notice to Members, NASD stated that Rule 2721 is proposed in response to problems NASD has identified in connection with the Member Private Offerings.  The new rule could add significantly to the regulatory burden of certain broker-dealers and issuers in private placement offerings. 

The rule represents a departure from prior NASD practice by regulating certain private offerings of securities.  Currently, NASD Conduct Rule 2710(b) (8) exempts private securities offerings from filing and review requirements of Rules 2710, 2720 and 2810.  However, under the proposed rule, the NASD would be granted the authority to substantively regulate the disclosure of Member Private Offerings, a form of regulation that has traditionally been outside of the NASD’s jurisdiction.

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