SEC Proposed Order Exempts Certain Finders From Registering as Broker
- Identifying, screening, and contacting potential investors;
- Distributing issuer offering materials to investors;
- Discussing issuer information included in any offering materials, provided that the Tier II Finder does not provide advice as to the valuation or advisability of the investment; and
- Arranging or participating in meeting with the issuer and investor.
- The issuer may not be a public, reporting company (or a company making an initial public offering);
- The offering must be a primary offering because the safe harbor is not available for resales of securities;
- The issuer’s offering must be conducted in reliance on an applicable exemption from registration under the United States Securities Act of 1933;
- The Finder may not make a general solicitation, so that only prospective investors already know the Finder should be solicited;
- Prospective investors must be accredited investors or the Finder must have a reasonable belief that the potential investor is an accredited investor;
- The Finder may not be an associated person of a broker-dealer;
- The Finder may not be subject to statutory disqualification at the time that he or she engages in the activity; and
- There must be a written agreement between the Finder and the issuer including a description of the services the Finder will provide and specifying the compensation.
- Provide prior to or at the time of the solicitation, a disclosure that includes:
- The name of the Finder;
- The name of the issuer;
- A statement describing the terms of the compensation arrangement under which the Finder will be paid; A description of any relationship between the Finder and the issuer;
- An explanation of any material conflicts of interest arising from the arrangement or relationship between the Finder and the issuer;
- An affirmative statement that the Finder is acting as an agent of the issuer, is not acting as an associated person of a broker-dealer, and is not under any obligation to act in the investor’s best interest; and
- Obtain from the investor, prior to or at the time of any investment in the issuer’s securities, a dated, written acknowledgment of receipt of the above required disclosures.
- Obligate the issuer or investor;
- Assist in structuring transactions or negotiating the terms of an offering;
- Perform any due diligence activities;
- Receive or hold customer funds or securities;
- Assist in preparing any sales materials;
- Perform any independent analysis of the sale;
- Assist in obtaining or provide financing for such purchases;
- Provide investment advice such as the valuation or financial advisability of the investment; or
- Make any recommendation concerning the investment.
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CORPORATE & SECURITIES