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FINLAW: Time to Apply to Become a FINRA Funding Portal

The SEC has approved FINRA Funding Portal Rules, and FINRA has issued on January 29, 2016 Regulatory Notice 16-06.  This regulatory notice outlines the process one needs to undertake to become a Title III Funding Portal member.  If you wish to participate in a Title III business, now is the time to file your Funding Portal New Member Application with FINRA.

Funding Portals, unlike Title II Funding Platforms, have to be SEC registered FINRA members, and will be directly regulated by FINRA, similar to a broker-dealer.  Form Funding Portal (Form FP) is now available to interested parties who wish to begin the application process.

Form FP requires applicants to submit information concerning the Portal’s organization chart, business model, contractual relationships, funding sources, recordkeeping and written procedures, including written supervisory procedures (WSPs), among other items.  As FINRA does a thorough vetting of broker-dealers, it can be anticipated that the funding portal review will be equally thorough and comprehensive in scope.  FINRA will be interested in the supervisory system, including procedures and controls, to be put into place to ensure a Funding Portal’s compliance with the federal securities laws and applicable FINRA Rules.  These include WSPs that are comprehensive and ensure that a Portal will meet all of its regulatory requirements.

FINRA will evaluate each application against its standards for admission.  The process will include one or more membership interviews.  While applications will be initially assessed for completeness by FINRA within 14-days of the initial filing, the process anticipates follow-up requests for additional information until the review is complete.  As all Title III Crowdfunding rules are effective on May 16, 2016, don’t delay applying to become a FINRA Funding Portal.

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