SEC : CAPITAL FORMATION MAKING "FINDERS" VIABLE

Individuals or entities acting as unregistered financial intermediaries, "finders" or "investment bankers" (hereinafter "finders") constitute a major problem in corporate finance transactions and in the area of mergers and acquisitions. The vast majority of these persons are unregistered broker-dealers under federal and state securities laws, and accordingly transactions in which they are involve jeopardize the issuer, its officers and directors, and other investors because of the use of the unregistered/non-exempt person. Further, some of the individuals have adverse regulatory histories or were closely affiliated with those who had, and some even had been barred or suspended from broker-dealer or agent registration by regulators or convicted of financial fraud. The bad ones too often bring financial arrangements that do not work to the advantage of the entity seeking a merger or needing financing, and taint the legality of transactions in which they are involved. Some are purveyors of "shell corporations," which almost invariably involve significant fraud both on those who purchase or merge with the shells, and in the subsequent after-market for the stock of the entity into which the shell is merged.

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