Eureka! Bill Introduced To Homologate Finders

by Allen Matkins

Questions about the use of finders have bedeviled transactional lawyers for years. The need for finders is the unintended consequence of the federal and state securities law exemptions that are conditioned on the absence of a general solicitation. Most start-ups don’t have preexisting relationships with rich people (aka accredited investors). Thus, they are sorely tempted to hire someone who knows, or claims to know, potential investors. One of the many questions raised by the use of finders is whether they must be registered under federal and/or state law as brokers or broker-dealers.

Now, Assembly Member Donald P. Wagner is proposing to address the licensing question head on. His bill, AB 713, would exclude from the definition of “broker-dealer” an individual who meets a new statutory definition of “finder” and satisfies numerous other conditions. The bill defines a “finder” as an individual who introduces or refers one or more accredited investors to an issuer or an issuer to one or more accredited investors, solely for the purpose of a potential investment in the securities of the issuer, and who does not:

  • participate in negotiating any of the terms of the investment;
  • advise any party to the securities transaction regarding the merits of, or the advantages or disadvantages of entering into the investment; or
  • sell or intend to sell any securities of the issuer, which securities are owned, directly or indirectly, by the finder as a part of the investment.

In addition, a finder must meet six additional conditions, including filing an initial statement of information with the Department of Business Oversight (fka Department of Corporations) and paying a fee.

Many will undoubtedly welcome this effort to regularize an activity that is widespread but not necessarily legal. The bill, of course, does not address the status of finders under the Securities Exchange Act of 1934.

Coincidentally, California’s is “Eureka!” which is the English transliteration of the Greek word, εὕρηκα. Eureka means “I have found it”. For the last two millenia, the word has been associated with Archimedes. According to Vitruvius Pollio, the new king of Syracuse ordered a golden crown made and provided the necessary gold. After the crown had been made, the king decided that he had been tricked as the gold had been adulterated. The crown weighed the same as the gold that the king had provided, but was the crown 100% gold? Crown in hand, the king went to Archimedes who quite naturally took the crown to his bath. After all, what else would you do if a king brought you a golden crown and asked you to check it out?

Here, I’ll pick up the story according to Pollio:

casu venit in balineum, ibique cum in solium descenderet, animadvertit, quantum corporis sui in eo insideret, tantum aquae extra solium effluere. idque cum eius rei rationem explicationis ostendisset, non est moratus, sed exsiluit gaudio motus de solio et nudus vadens domum universis significabat clara voce invenisse, quod quaereret; nam currens identidem graece clamabat εὕρηκα εὕρηκα.

By chance [Archimedes] came to the bath, when he was descending into the tub, he thought as much as his body sank into the tub, so much water flowed out of the tub. Since this demonstrated the reason of the matter, he did not delay, but leaped from the tub shaking with joy and going home naked he was making known to all with a clear voice that he found what he was seeking, for running he was shouting again and again in Greek, ”Eureka, Eureka”.

Vitruvius Pollio, De Architectura, Book IX, Introduction, § 9 [my translation]. The mental picture of a naked Greek polymath running through the streets of Syracuse shouting “I’ve found it!” is so vivid that it lives on in popular culture. Some have question whether the event occurred because Archimedes didn’t write about and Pollio wrote his book two centuries later. Others question the story on scientific grounds. Pollio, like Archimedes, may be all wet and exposed, but at least he told a memorable tale.


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.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.