Last week, the SEC proposed a finder’s exemption to foster capital raising for small businesses. The proposal, which is not yet final, provides a safe harbor for finders to assist issuers in raising capital from accredited investors. The proposal creates two tiers of finders (Tier I and II), and the requirements a finder must meet for each tier. This is a significant development by the SEC as there have been many unregistered broker-dealer actions brought under Section 15 of the Exchange Act since the enactment of the JOBS Act, often targeting finders who ran afoul of broker-dealer registration requirements. The proposal addresses eligibility, limitations, compensation and disclosure, among other items, and should enhance capital raising in the real estate syndicate business and other areas of small business capital raising. There will be a 30-day comment period for the proposed exemption following publication in the Federal Register.
The information and materials in this article are provided for general informational purposes only and are not intended to be legal advice. The issues discussed include complicated areas of law and legal advice should be obtained from a securities attorney about your specific circumstances.