While the provisions of the Jumpstart Our Business Startups Act, commonly known as the “JOBS Act,” to enable capital-raising by crowdfunding await the required rulemaking by the Securities and Exchange Commission, it has been interesting to read about the recent efforts of a relatively new organization, Crowdfund Intermediary Regulatory Advocates, or “CFIRA,” to influence the rulemaking by the SEC and the Financial Industry Regulatory Authority, or “FINRA,” the SEC-approved self-regulatory organization for securities brokers and dealers.
An issuer with publicly traded securities listed on a national securities exchange, like the NYSE or the NASDAQ Global Market, is obligated to give advance notice of certain corporate actions to the exchange. Because that obligation is part of the listing agreement with the exchange, the issuer is well-aware of it. An issuer with publicly traded securities not listed on a national securities exchange, such as an issuer whose shares trade over the counter (a “non-exchange issuer”), is also obligated to give notice of certain corporate actions—even though the issuer did not enter into any agreement giving rise to the obligation, may not actually be supporting the trading of its securities and may not be aware of the obligation. The non-exchange issuer must give notice of certain corporate actions to the Financial Industry Regulatory Authority (“FINRA”) under the SEC’s Rule 10b-17 and FINRA’s Rule 6490.