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FINRA issues new Investors Bulletin:

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1manband   Monday, 01/01/18 09:23:37 PM
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FINRA issues new Investors Bulletin:

Corporate Actions by Public Companies—What You Should Know

From FINRA's Office of Investor Education as published today.

https://www.finra.org/investors/highlights/corporate-actions-public-companies-what-you-should-know

Including this warning:

"Be Wary of Announcements Regarding FINRA "Approval" of a Corporate Action

Companies undergoing a corporate action often issue a press release or other communication, such as a tweet or other social media post, to provide details of the change. For instance, a company might announce a new corporate name that reflects a change in product lines or business focus. However, in the past, some companies have used these publications to suggest that FINRA has somehow "approved" a corporate action or that a corporate action will be effective once FINRA approves it. To clarify, this is not the case: FINRA does not approve corporate actions."

The specific language is important - regulators, including FINRA and the SEC, do not "approve" any corporate action. Instead, FINRA will process any corporate action requested by companies (no matter how crazy they are) unless they are considered to be "deficient" under the very narrow and specific reasons contained in Rule 6490:

"3) Deficiency Determination
In circumstances where an SEA Rule 10b-17 Action or Other Company-Related Action is deemed deficient, the Department may determine that it is necessary for the protection of investors, the public interest and to maintain fair and orderly markets, that documentation related to such SEA Rule 10b-17 Action or Other Company-Related Action will not be processed. In instances where the Department makes such a deficiency determination, the request to process documentation related to the SEA Rule 10b-17 Action or Other Company-Related Action, as applicable, will be closed, subject to paragraphs (d)(4) and (e) of this Rule. The Department shall make such deficiency determinations solely on the basis of one or more of the following factors: (1) FINRA staff reasonably believes the forms and all supporting documentation, in whole or in part, may not be complete, accurate or with proper authority; (2) the issuer is not current in its reporting requirements, if applicable, to the SEC or other regulatory authority; (3) FINRA has actual knowledge that the issuer, associated persons, officers, directors, transfer agent, legal adviser, promoters or other persons connected to the issuer or the SEA Rule 10b-17 Action or Other Company-Related Action are the subject of a pending, adjudicated or settled regulatory action or investigation by a federal, state or foreign regulatory agency, or a self-regulatory organization; or a civil or criminal action related to fraud or securities laws violations; (4) a state, federal or foreign authority or self-regulatory organization has provided information to FINRA, or FINRA otherwise has actual knowledge indicating that the issuer, associated persons, officers, directors, transfer agent, legal adviser, promoters or other persons connected with the issuer or the SEA Rule 10b-17 Action or Other Company-Related Action may be potentially involved in fraudulent activities related to the securities markets and/or pose a threat to public investors; and/or (5) there is significant uncertainty in the settlement and clearance process for the security."

http://finra.complinet.com/en/display/display.html?rbid=2403&record_id=12829&element_id=9364&highlight=6490#r12829

In the absence of one of the reasons above, FINRA will process the requested corporate action. But it is certainly not "approval", as FINRA has one additional course of action available to them in questionable cases that cannot be denied under FINRA rules - referral of the case to other regulatory authorities, particularly the SEC. FINRA recently began posting on their website regulatory actions taken by other regulators which they state were as a direct result of FINRA's initial referrals. No doubt many of the actions against individual companies, including SEC suspensions, utilized information obtained during FINRA's processing of corporate action requests.

http://www.finra.org/newsroom/actions-resulting-referrals-federal-and-state-authorities

Just because FINRA processed a corporate action for a questionable company doesn't mean they didn't make a referral to another regulator for investigation and future action. Just another reason why no one should believe that because FINRA processed the request it means FINRA "approves" of the Company and they are "clean". It doesn't.


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