Still Room for Finders? Courts Question SEC View of Broker Activity

Download: Courts_Question_SEC_View.pdf

Many small to mid-size businesses are approached by ‘‘finders’’ who offer to introduce them to potential investors in exchange for a fee based on a percentage of the amount raised if the investors invest. Many of these finders operate without registering as ‘‘brokers’’ with the Securities and Exchange Commission (‘‘SEC’’ or the ‘‘Commission’’), even though the SEC takes the position that the receipt of such ‘‘transaction-based compensation’’ brings the finder within the definition of a ‘‘broker’’ under the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’).1 If someone is acting as a broker and is not registered, a violation of Section 15(a) of the Exchange Act2 has occurred.

More articles on Securities Alerts and Issues can be found in our Securities Alerts: SEC & FINRA Section

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Still Room for Finders? Courts Question SEC View of Broker Activity

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