This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Asset 3
  • About
  • People
  • Capabilities
  • Insights
  • Careers
  • Public Interest
  • Inclusion
  • Contact us
    Contact us
  • Locations
    Locations
  • Search
    Search
  • About
    • About
    • Message From the CEO
    • Firm History
    • Alumni
    • Alumni
    • In Memoriam
  • People
  • Capabilities
    • Practices
    • Industries
    • Global Reach: The Law Firm Network
    • Bankruptcy & Restructuring
    • Brand & Reputation Management
    • Intellectual Property
    • Litigation & Dispute Resolution
    • Special Situations, Distressed Debt and Debt Trading
    • Transactions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Energy & Environmental
    • Entertainment & Media
    • Investment Management 
    • Life Sciences
    • Technology
    • Real Estate
    • Bankruptcy & Restructuring
    • Bankruptcy Litigation
    • Mass Torts Bankruptcy
    • Intellectual Property
    • Intellectual Property Litigation
    • Patents
    • Trademark, Copyright & Advertising
    • Patent Trial and Appeals Board (PTAB)
    • Litigation & Dispute Resolution
    • Civil Fraud Litigation
    • Employment Practices and Litigation
    • Government Contracts Litigation
    • Intellectual Property Litigation
    • Insurance Recovery
    • Litigation Funding
    • M&A and Private Equity Litigation
    • Real Estate Litigation
    • Patent Trial and Appeals Board (PTAB)
    • UK Tax Controversy & Litigation
    • Special Situations, Distressed Debt and Debt Trading
    • Distressed Debt & Claims Trading
    • Litigation Funding
    • Finance
    • Real Estate Special Situations
    • Transactions
    • Capital Markets
    • Cross-Border Transactions
    • Emerging Growth Companies & Venture Capital
    • Employment
    • Finance
    • Franchising
    • Mergers & Acquisitions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Economic Sanctions & Export Controls
    • Energy & Environmental
    • Energy
    • Energy Transition
    • Environmental
    • Entertainment & Media
    • Brand & Reputation Management
    • Intellectual Property
    • Sports
    • Investment Management
    • Fund Formation
    • Private Equity Transactions
    • Distressed Debt
    • Emerging Growth Companies & Venture Capital
    • Family-Owned & Closely Held Businesses
    • Private Equity Litigation
    • Life Sciences
    • BR BioAdvisory Services
    • Technology
    • Artificial Intelligence
    • Cybersecurity & Data Privacy
    • Digital Commerce
    • Fintech
    • Real Estate
    • Hospitality & Leisure
    • Distressed Real Estate
    • Real Estate Special Situations
    • Real Estate Litigation
    • Wireless Network Infrastructure
  • Insights
    • Client News
    • Firm News
    • Briefings
    • Events
  • Careers
    • Experienced Lawyers
    • U.S. Law Students
    • London Trainee Program
    • Business Professionals
    • Professional Development
  • Public Interest
    • Brown Rudnick Charitable Foundation
    • Pro Bono & Community Service
  • Inclusion
    • Inclusion
    • Women in Business Series
  • Contact Us
  • Location
  • Search
  • About
    • About
    • Message From the CEO
    • Firm History
    • Alumni
    • Alumni
    • In Memoriam
  • People
  • Capabilities
    • Practices
    • Industries
    • Global Reach: The Law Firm Network
    • Bankruptcy & Restructuring
    • Brand & Reputation Management
    • Intellectual Property
    • Litigation & Dispute Resolution
    • Special Situations, Distressed Debt and Debt Trading
    • Transactions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Energy & Environmental
    • Entertainment & Media
    • Investment Management 
    • Life Sciences
    • Technology
    • Real Estate
    • Bankruptcy & Restructuring
    • Bankruptcy Litigation
    • Mass Torts Bankruptcy
    • Intellectual Property
    • Intellectual Property Litigation
    • Patents
    • Trademark, Copyright & Advertising
    • Patent Trial and Appeals Board (PTAB)
    • Litigation & Dispute Resolution
    • Civil Fraud Litigation
    • Employment Practices and Litigation
    • Government Contracts Litigation
    • Intellectual Property Litigation
    • Insurance Recovery
    • Litigation Funding
    • M&A and Private Equity Litigation
    • Real Estate Litigation
    • Patent Trial and Appeals Board (PTAB)
    • UK Tax Controversy & Litigation
    • Special Situations, Distressed Debt and Debt Trading
    • Distressed Debt & Claims Trading
    • Litigation Funding
    • Finance
    • Real Estate Special Situations
    • Transactions
    • Capital Markets
    • Cross-Border Transactions
    • Emerging Growth Companies & Venture Capital
    • Employment
    • Finance
    • Franchising
    • Mergers & Acquisitions
    • Tax
    • White Collar Defense, Investigations & Compliance
    • Economic Sanctions & Export Controls
    • Energy & Environmental
    • Energy
    • Energy Transition
    • Environmental
    • Entertainment & Media
    • Brand & Reputation Management
    • Intellectual Property
    • Sports
    • Investment Management
    • Fund Formation
    • Private Equity Transactions
    • Distressed Debt
    • Emerging Growth Companies & Venture Capital
    • Family-Owned & Closely Held Businesses
    • Private Equity Litigation
    • Life Sciences
    • BR BioAdvisory Services
    • Technology
    • Artificial Intelligence
    • Cybersecurity & Data Privacy
    • Digital Commerce
    • Fintech
    • Real Estate
    • Hospitality & Leisure
    • Distressed Real Estate
    • Real Estate Special Situations
    • Real Estate Litigation
    • Wireless Network Infrastructure
  • Insights
    • Client News
    • Firm News
    • Briefings
    • Events
  • Careers
    • Experienced Lawyers
    • U.S. Law Students
    • London Trainee Program
    • Business Professionals
    • Professional Development
  • Public Interest
    • Brown Rudnick Charitable Foundation
    • Pro Bono & Community Service
  • Inclusion
    • Inclusion
    • Women in Business Series

Search People

Search by last name

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

see all people

Asset 3
  • LinkedIn
  • X (formerly known as Twitter)
  • Instagram
  • YouTube
  • Contact Us
  • Terms of Use
  • Privacy
  • Sitemap
  • LinkedIn
  • X (formerly known as Twitter)
  • Instagram
  • YouTube

© 2024 Brown Rudnick LLP. Attorney advertising.

All Rights Reserved.

All Posts Subscribe
print-logo
10/21/2020 3:58:00 PM | 3 minute read

SEC Proposes Conditional Exemption for “Finders” Involved in Capital Raising

Get in touch

Avatar
Brown Rudnick
Avatar
James Bedar
Partner
Avatar
Mark Dorff
Partner
Avatar
Michael Cohen
Partner

+1 more...

Show less

Get in touch

Avatar
Brown Rudnick
Avatar
James Bedar
Partner
Avatar
Mark Dorff
Partner
Avatar
Michael Cohen
Partner

On October 7, 2020, the Securities and Exchange Commission (the “SEC”) proposed a new conditional rule exempting certain “Finders” from broker registration requirements when helping issuers raise capital from accredited investors in private transactions. Exempted Finders would be permitted to receive transaction-based compensation in exchange for conducting certain limited activities without having to register with the SEC under Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”). To qualify for the proposed exemption, Finders would need to (1) meet a series of general requirements applicable to all Finders, and (2) limit the scope of their activities to comply with the restrictions applicable to whichever of the two proposed tiers they are classified within.

Current regulations do not directly address whether and under what circumstances Finders may find or solicit potential investors without being required to register as a broker and instead leave Finders and issuers to seek answers through individual no-action letters. The proposal is intended to set clear guidelines and in turn provide small businesses with easier access to external capital. SEC Chairman Jay Clayton stated that the proposal “will bring clarity to Finders’ regulatory status in a tailored manner that addresses the capital formation needs of certain smaller issuers while preserving investor protections.” The proposal is subject to a 30-day comment period following its publication in the Federal Register.

Qualified Offerings

The proposed exemption would only be available in connection with offerings made in reliance on an exemption from registration under the Securities Act of 1933 by issuers who are not required to file reports under Section 13 or Section 15(d) of the Exchange Act. Additionally, the offering must be directed at potential investors who are “accredited investors” as defined in Rule 501 of Regulation D or potential investors who the Finder reasonably believes are “accredited investors.”

The proposed exemption would only apply to the activities permitted for each tier of Finders. A Finder could not rely on this proposed exemption to engage in any other broker activity, such as facilitating a registered offering, a resale of securities, or the sale of securities to non-accredited investors, without abiding by the registration requirements applicable to such activities. 

Though targeted at smaller issuers, the SEC currently has not specified a cap on the amount of funds raised under this proposal, meaning that the proposed exemption could potentially be relied on for larger transactions so long as they meet the qualifications specified below.

Qualified Finders

To qualify for the proposed exemption, a Finder must be a natural person, not an entity, and the following conditions must be met:

  • the Finder and issuer must have a written agreement governing the Finder’s services that includes a description of the services provided and associated compensation;
  • the Finder may not engage in general solicitation or be associated with a broker-dealer; and
  • the Finder may not be subject to statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act, while seeking to qualify for the proposed exemption.

In addition to these general conditions, a Finder would be further bound by the conditions applicable to whichever tier that they are classified within.

Finders classified in Tier I must limit their activities to providing the contact information of potential investors to issuers, limited to a single capital raising transaction by a single issuer in a 12-month period. Notably, a Tier I Finder cannot have any contact with a potential investor about the issuer.

Finders engaging in direct solicitation of investors on behalf of an issuer would be classified in Tier II and must limit their activities to: “(i) identifying, screening, and contacting potential investors; (ii) distributing issuer offering materials to investors; (iii) discussing issuer information included in any offering materials, provided that the Tier II Finder does not provide advice as to the valuation or advisability of the investment; and (iv) arranging or participating in meetings with the issuer and investor.” Additionally, Tier II Finders would be subject to certain disclosure requirements, including specifying their relationship to the issuer and compensation prior to or at the time of solicitation, and would have to obtain a dated written acknowledgment of receipt of the required disclosures from any solicited investor prior to or at the time of their investment in the issuer’s securities.

Although Tier II Finders are permitted to engage in a broad scope of activities under the proposed exemption, no Finders would be permitted to “(i) be involved in structuring the transaction or negotiating the terms of the offering; (ii) handle customer funds or securities or bind the issuer or investor; (iii) participate in the preparation of any sales materials; (iv) perform any independent analysis of the sale; (v) engage in any “due diligence” activities; (vi) assist or provide financing for such purchases; or (vii) provide advice as to the valuation or financial advisability of the investment.”

Click to view the full alert.

Sign up to receive our latest BRiefings delivered directly to your inbox. Subscribe

Get in touch

Avatar
Brown Rudnick
Avatar
James Bedar
Partner
Avatar
Mark Dorff
Partner
Avatar
Michael Cohen
Partner

+1 more...

Show less

Get in touch

Avatar
Brown Rudnick
Avatar
James Bedar
Partner
Avatar
Mark Dorff
Partner
Avatar
Michael Cohen
Partner
Walters v. OpenAI: A Game-Changing Verdict Reshaping AI, Defamation and Tech's Future
5/27/2025 9:16:20 PM

Walters v. OpenAI: A Game-Changing Verdict Reshaping AI, Defamation and Tech's Future

By Erick Robinson
In a decision that could reshape the legal and technological landscape, the Superior Court of Gwinnett County, Georgia, issued a ruling...
3
3
6

Latest Insights

In the Financial Times, Partner Matthew Sharp discusses UK Renewable Transport Fuel Obligation (RTFO) compliance
5/30/2025 8:28:25 AM

In the Financial Times, Partner Matthew Sharp discusses UK Renewable Transport Fuel Obligation (RTFO) compliance

By Matthew Sharp
German Court Allows Meta to Use Public Data for AI Training: Implications for Europe’s AI Landscape
5/27/2025 3:16:48 PM

German Court Allows Meta to Use Public Data for AI Training: Implications for Europe’s AI Landscape

By Erick Robinson
3
3
NY Court of Appeals Applies Internal-Affairs Doctrine to Standing in Derivative Actions on Behalf of Foreign Corporations
5/21/2025 8:19:59 PM

NY Court of Appeals Applies Internal-Affairs Doctrine to Standing in Derivative Actions on Behalf of Foreign Corporations

By Jonathan Richman
1
25
26