i. underwriting agreements

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II. THE FINRA REVIEW PROCESS Underwriting Compensation (cont’d) FINRA rules do not state a maximum amount of compensation that is considered fair and reasonable, but for initial public offerings in recent history, FINRA has expressed that the maximum should be 9% FINRA rules also prohibit a variety of other terms and arrangements considered unfair and unreasonable, such as excessively long dated “tail fee” arrangements for deals done away from an engaged underwriter In addition to the underwriting agreement, all letters of intent and engagement letters entered into between the issuer and an underwriter in the six months prior to the initial filing need to be submitted for review 22
II. THE FINRA REVIEW PROCESS Lockup Requirements • If an underwriter or “related person” acquires unregistered equity securities of the issuer during the six months prior to the initial filing of the IPO, the securities must be locked up for 180 days after the effective date of the registration statement, with limited exceptions • FINRA rules regarding underwriting compensation and lockups can greatly complicate an underwriter’s ability to participate in an IPO for a company in which an affiliated private equity arm or investment management arm has made an investment • Unrealized appreciation in the investment may be imputed as underwriter compensation that, together with the underwriting discount, exceeds what is considered fair and reasonable 23
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Page 3 and 4: I. UNDERWRITING AGREEMENTS Parties,
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Page 9 and 10: I. UNDERWRITING AGREEMENTS Indemnif
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Page 13 and 14: I. UNDERWRITING AGREEMENTS Expenses
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