This week the president of FINRA’s office of dispute resolution, Linda Feinberg, announced the SRO will open its arbitration forum to registered investment advisers. The statement was made at the annual meeting of the Public Investors Arbitration Bar Association where Feinberg indicated FINRA will formally announce the program in the near term. Currently, the forum is available for investor and industry disputes involving broker-dealers. While investment advisers may submit to FINRA arbitration if a claim is brought against them, they are not eligible to affirmatively bring claims in the forum. Unlike the mandatory FINRA arbitration required for broker-dealers, advisers’ use of the forum will be voluntary and require the agreement of all parties to a dispute.

Last month FINRA announced SEC approval of new FINRA Rule 5123. The Rule requires each FINRA member firm selling securities in a private placement to file a copy of any private placement memorandum, term sheet or other offering documents with FINRA within 15 calendar days from the date of sale (or indicate that it did not use any such offering document). The rule becomes effective on December 3, 2012 and applies prospectively to any private placement that begins selling efforts thereafter. The rule exempts certain limited offerings sold solely to institutional, qualified and other sophisticated purchasers.

In a news conference this week, North American Securities Administrators Association (“NASAA”) President and Arkansas Securities Commissioner Heath Abshure sharply criticized the SEC’s proposed rule allowing marketing of private offerings. Mr. Absure, who was joined in the conference by Cristina Martin Firvida of AARP, Heather Slavkin Corzo, AFL-CIO, and Barbara Roper of the Consumer Federation of America, called on the SEC to withdraw the proposal and craft new rules that promote capital formation but do not sacrifice investor protection. As Abshure stated: “Rule 506 offerings already are the most frequent financial product at the heart of state enforcement investigations and actions. Lifting the advertising ban on these highly risky, illiquid offerings, without requiring appropriate safeguards, will create chaos in the market and expose investors to an even greater risk of fraud and abuse. Without adequate investor protections to safeguard the integrity of the private placement marketplace, investors should and will flee from the market, leaving small businesses without an important source of capital.”

The California Court of Appeal recently struck a post-employment non-competition provision in an employment agreement which was part of a broader acquisition deal. The opinion, Fillpoint, LLC v. Mass (August 24, 2012), demonstrates California’s strong public policy in favor of competition and against overly restrictive covenants, including the limitations to the exception to the general policy against such covenants found in California Bus. & Prof. Code Section 16601. That Section specifically allows a non-competition provision in connection with the sale of a business. Quoting an earlier case, the Fillpoint court explained the rationale for this exception to the general rule: Section 16601 “serves an important commercial purpose by protecting the value of the business acquired by the buyer. In the case of the sale of the goodwill of a business it is ‘unfair’ for the seller to engage in competition which diminishes the value of the asset he sold.”