FINRA to Conduct Sweep of Non-Traded BDCs
The Financial Industry Regulatory Authority is conducting an inquiry into non-traded business development companies, according to a targeted exam letter issued by the regulator yesterday.
According to FINRA, they and other regulators conduct targeted exams, known as sweeps, to gather information and carry out investigations. They claim that the sweep information can be used to focus examinations and pinpoint regulatory response to emerging issues.
FINRA is requesting documents and information from unnamed firms for the period of January 1, 2015 through June 30, 2016. The firms have until September 9th to submit the following:
* A list of each BDC offered by the firm, including the BDC name, SEC file number, dates of the offering, and the firm’s role in the offering.
* For each BDC offered, they must submit a list of all participating broker-dealers that have a selling agreements with the firm and sample copies representative of each type of selling agreement utilized.
* A list, in excel format, by date, of all broker-dealers that sold the aforementioned identified BDCs to its customers in initial or follow-on offerings. FINRA is requesting the name of the participating broker-dealer, the total number of shares bought and sold, the total dollar value of proceeds, and the number of customers purchasing the BDC.
* A copy of the firm’s due diligence procedures and, if not already included in the due diligence procedures, a written description of the due diligence that the firm conducts of the BDC initially and on an ongoing basis. Additionally, FINRA is requesting a written description of the due diligence that the firm conducts of participating broker-dealers.
FINRA says that targeted firms are “carefully chosen” based on the level and nature of business activity in a particular area, customer complaints and regulatory history, and prior examination findings.
