Finding Your Fortune – SEC’s Proposal To Allow Non-Registered Finders

Insights Finding Your Fortune – SEC’s Proposal To Allow Non-Registered Finders Carl Sherer · November 2, 2020

The US Securities and Exchange Commission proposes to establish a new limited and conditional exemption from the broker registration requirements for natural persons engaging in certain limited capital-raising activities on behalf of issuers seeking to raise funds from accredited investors. If adopted, the proposed exemption will allow natural persons to engage in certain limited activities involving accredited investors without registering with the Commission as brokers. The idea is to help small businesses raise capital and give clarity to investors, issuers, and the finders who assist them.

If you’re a start-up company and you have tried to raise investment capital, you may have come across an esoteric set of rules called the broker-dealer rules. The Securities Exchange Act requires that “finders” who receive compensation for raising money that is based on the amount raised must be registered with the Securities and Exchange Commission as a broker-dealer. In general, the rules apply unless both the investor and the agent receiving the compensation are non-US persons, which means that they can and often do affect non-US start-ups and investors, in addition to their impact on the US markets. Read the full Family Wealth Report article.

Carl M. Sherer is Counsel to Rimon. He holds a JD as well as an MBA from New York University and is a graduate of Columbia University. Mr. Sherer has over twenty-five years of experience in corporate and securities law, helping individuals and corporations in both transactional and regulatory settings in the United States and in Israel. Read more.

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