SEC Considering a Proposed Exemptive Order for Finders

On October 7, 2020, the Securities and Exchange Commission (the “SEC”) voted to propose a new, limited, conditional exemption from broker registration requirements for “finders” who help issuers raise capital in private markets from accredited investors. (See https://www.sec.gov/news/press-release/2020-248).

Under Section 15(a)(1) of the Securities Exchange Act of 1934, finders and solicitors of investors are required to register as broker-dealers.  Historically, the SEC has acknowledged that finders may be exempt from broker registration under certain very limited conditions, and the SEC staff from time to time has issued “no action” letters to such effect.  However, to date the SEC has never provided general exemptions for finders.  Because the broker-dealer registration requirements are onerous, the proposed rule is welcome news for would-be finders.