Capital Raising Using Unregistered Finders and Financial Consultants

Corporate clients generally are convinced that with sufficient funding their enterprises will succeed. Nevertheless, obtaining that capital often is elusive. In many cases, an enterprise is not sufficiently advanced for traditional sources of capital to be interested. Generally, these enterprises learn that they first must raise additional capital from friends and family or angel investors, and that after this initial round of funding an investment banker is in a much better position to assist with obtaining capital from more traditional sources. If friends, family, and angel funds are unavailable or inadequate, the entrepreneur often becomes desperate for funds and is susceptible to sales pitches from so‐called "finders" or "financial consultants." These entities offer to raise capital for the enterprise in exchange for a percentage fee tied to the amount raised. The retainer agreement also frequently requires an up‐front non‐refundable “expense and due diligence deposit.”

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