Corporate Actions The FINRA Process
FINRA announced last month major changes to the corporate action review process. We view these changes as the most significant update to the Corporate Actions Process since FINRA Rule 6490 was adopted.
FINRA is charged with regulating the Over-the-Counter market. As part of this regulatory oversight, FINRA has final approval on an Company, a/k/a Issuer’s corporate actions.
Corporate actions are events carried out by a company that have a material impact upon the shareholders. Examples of the types of corporate actions include:
- Stock Splits: Forward Splits which result in the number of shares being increased by a multiple of the existing number of shares; and reverse-splits which result in a reduction on the number of shares issued and outstanding.
- Dividends: Companies whose shares trade on the OTC Market are required to obtain FINRA regulatory approval in order to pay either a cash or stock dividend to their shareholders.
- Mergers and Acquisitions: Acquiring or combining with another business.
- Rights Offerings: The issuance of rights to acquire additional shares to the existing shareholders.
- Spin Offs or Divestiture: The issuance of shares in a newly created independent business to the existing shareholders of the company; or in some cases, the existing operations to the existing management.
- Name Changes: Changing the name of the business.
In general, if it requires Board of Directors and/or shareholder approval, and impacts the shareholders, it is considered a corporate action.
Beginning June 5th, 2023, FINRA will be replacing the current corporate action notification, review, and approval process with the new Corporate Actions Management platform. This new platform will be accessible through the FINRA Gateway. (https://gateway.finra.org)
The new Corporate Actions Management Platform will allow issuers and external parties to:
- Submit and update company-related corporate action submission.
- Make electronic payments via. FINRA’s OPAY system for assessed notification fees.
- View the status of submission.
- Communicate with FINRA via. messaging within each submission.
- Receive notifications when a new information request is initiated by FINRA.
- Respond to requests for information.
We view this as a significant improvement over the current corporate action process, where communication with FINRA is through a series of emails chained together. We have used the BaseCamp project management system for almost 20 years. Our initial review of the available information indicates that the new FINRA project management system appears to modeled very similar to BaseCamp. If that is the case, then this is a dramatic improvement for the process and issuing companies.
About Coral Capital Advisors
Coral Capital Advisors is an independent consulting and advisory firm focused on companies and participants in the lower and middle markets. We partner with our clients to provide cost effective solutions to real world issues and situations. Our experienced team brings a diverse set of skills that allows us to service a wide variety of needs. Our area of services and expertise focuses on bringing services and solutions to our clients that are normally only available to much larger firms. Coral Capital Advisors, LLC. provides services to Investment Banks, Private Equity Funds, investors, and both privately held and publicly traded companies, as well as various stakeholders in those organizations. This has included international public companies with operations on three (3) continents to smaller privately held domestic companies. Our experience in the areas of corporate advisory, due diligence reviews, and regulatory compliance allows for a cost effective and efficient solution to the issues at hand. Please feel free to contact our offices to see how we may be of assistance.