NASAA Urges No Liftoff For Finders Relief

Allen Matkins

Allen Matkins

Last week, the North American Securities Administrators Association issued a comment letter urging the Securities and Exchange Commission not to move forward on its proposal to issue a conditional order exempting finders from the requirement to register as brokers.  The SEC had proposed the order as a means "to assist small businesses to raise capital and to provide regulatory clarity to investors, issuers, and the finders who assist them".  Despite the numerous conditions attached the SEC's proposal, NASAA argued that:

"This is another instance in which the Commission seeks to expand the private markets with no commensurate effort either to protect investors from the evident risks of fraud, or to understand how an exemption could be abused."

The following day, 30 state securities administrators sent a separate letter arguing for "full public rulemaking".  California was not a signatory to the letter.

In 2015, California exempted "finders" from its broker-dealer registration requirement.  Cal. Stats. 2015, ch. 743.  The exemption, which is codified in Section 25206.1 of the Corporations Code, is limited to natural persons and subject to numerous conditions and restrictions.  Persons relying on the exemption must file a statement of information in advance and make renewal filings.  

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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