Blog FinReg + Policy Watch October 09, 2020

Divided SEC Votes to Propose Finder Exemption from Broker Registration

On October 7, 2020, the U.S. Securities and Exchange Commission (“SEC”) voted 3-2 to propose a conditional exemption (“Exemption”)1 to permit natural persons to engage in limited securities activities as “finders” on behalf of private issuers without registering as brokers under Section 15 of the Securities Exchange Act of 1934, as amended (“Exchange Act”). If adopted, the proposed Exemption would put an end to some of the debate and uncertainty surrounding the permissibility of private issuers using unregistered finders to assist with raising capital. Please refer to our August 2020 client alert, in which we provided background on, and addressed many of the issues and concerns (and even some criticism) surrounding, what has been, to say the least, a murky area of U.S. securities law and regulation. This includes the push and pull of federal and state oversight in this area.

In August, the New York State Attorney General (NYSAG) unveiled a package of related reform proposals intended to protect the public from fraudulent exploitation in the offering and sale of securities.[5] Among other things, if adopted, the proposals would define “Finder” and would impose registration and exam requirements on these individuals.

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