SEC Says Again: Transaction-Based Compensation Triggers Registration Requirement


For many years, finders (people who assist companies in finding private funding and are paid with a percentage of the amount raised) have been advised that they did not have to register as “brokers” with the Securities and Exchange Commission (SEC) if they limit their activities to making introductions and they do not otherwise participate actively in the transaction.

In a new Legal Update, entitled SEC Says Again: Transaction-Based Compensation Triggers Registration Requirement, Pryor Cashman Corporate Partner Stephen M. Goodman reports on an SEC no-action letter issued in May, 2010 which stresses that even making introductions can trigger the registration requirement if the finder receives “transaction-based compensation” (i.e., a percentage of the amount raised).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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