Finders – Part 2
Following the SEC’s proposed conditional exemption for finders (see HERE), the topic of finders has been front and center. New York has recently adopted a new finder’s exemption, joining California and Texas, who were early in creating exemptions for intra-state offerings. Also, a question that has arisen several times recently is whether an unregistered person can assist a U.S. company in capital raising transactions outside the U.S. under Regulation S. This blog, the second in a three-part series, will discuss finders in the Regulation S context.
Regulation S
It is very clear that a person residing in the U.S. must be licensed to act as a finder and receive transaction-based compensation, regardless of where the investor is located. The SEC sent a poignant reminder of that when, in December 2015, it filed a series of enforcement proceedings against U.S. immigration lawyers for violating the broker-dealer registration rules by accepting commissions in connection with introducing investors to projects relying
SEC Proposed Conditional Exemption For Finders
Over the years I have written many times about exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services (see, for example: HERE). Finally, after years of advocating for SEC guidance on the topic, the SEC has proposed a conditional exemption for finders assisting small businesses in capital raising. The proposed exemption will allow for the use of finders to assist small businesses in raising capital from accredited investors.
In its press release announcing the proposal, SEC Chair Clayton acknowledged the need for guidance, stating, “[T]here has been significant uncertainty for years, however, about finders’ regulatory status, leading to many calls for Commission action, including from small business advocates, SEC advisory committees and the Department of the Treasury. If adopted, the proposed relief will bring clarity to finders’ regulatory status in a tailored manner that addresses the capital formation needs of certain smaller issuers while preserving investor protections.”
Separately, New York
The Payment Of Finders’ Fees- An Ongoing Discussion
Introduction
As a recurring topic, I discuss exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services. I have previously discussed the no-action-letter-based exemption for M&A brokers, the exemptions for websites restricted to accredited investors and for crowdfunding portals as part of the JOBS Act and the statutory exemption from the broker-dealer registration requirements found in Securities Exchange Act Rule 3a4-1, including for officers, directors and key employees of an issuer. I have also previously published a blog on the American Bar Association’s recommendations for the codification of an exemption from the broker-dealer registration requirements for private placement finders. I’ve included links to each of these prior articles in the conclusion to this blog.
A related topic with a parallel analysis is the use of finders for investors and investor groups, an activity which has become prevalent in today’s marketplace. In that case the investor group utilizes the services
Finders- The Facts Related To Broker-Dealer Registration Requirements
Introduction
As a recurring topic, I discuss exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services. I have previously discussed the no-action-letter-based exemption for M&A brokers, the exemptions for websites restricted to accredited investors and for crowdfunding portals as part of the JOBS Act and the statutory exemption from the broker-dealer registration requirements found in Securities Exchange Act Rule 3a4-1, including for officers, directors and key employees of an issuer. I have also previously published a blog on the American Bar Association’s recommendations for the codification of an exemption from the broker-dealer registration requirements for private placement finders. I’ve included links to each of these prior articles in the conclusion to this blog.
A related topic with a parallel analysis is the use of finders for investors and investor groups, an activity which has become prevalent in today’s marketplace. In that case the investor group utilizes the services of a finder
Case Study of Online Funding as Related to Broker-Dealer Exemptions
Introduction
As a recurring topic, I am discussing exemptions to the broker-dealer registration requirements for entities and individuals that assist companies in fundraising and related services. On February 18th I published a blog about the new no-action-letter-based exemption for M&A brokers, the exemptions for websites restricted to accredited investors and for crowdfunding portals as part of the JOBS Act. Further on, I wrote on the statutory exemption from the broker-dealer registration requirements found in Securities Exchange Act Rule 3a4-1, including for officers, directors and key employees of an issuer.
This blog addresses the statutory and related exemptions that affect, and would permit, the operation of a funding website, including the statutory exemption from broker-dealer registration enacted into law as part of the JOBS Act on April 5, 2012. This blog also includes an analysis of a fictional funding website.
Summary of Exemption from Broker-Dealer Registration Found in Title II of the JOBS Act
Title II of the JOBS Act created
