Historically, the SEC has been aggressive in bringing enforcement actions against those involved in transactions with unregistered broker-dealers and those that fail to register as broker-dealers – most recently in several cases alleging unregistered dealer activity. The SEC continues to impose sanctions on private equity firms and managers for using unregistered broker-dealers. The SEC is also carefully scrutinizing unregistered broker-dealer issues in its OCIE compliance exams of private investment funds.
Fund managers and companies can be subject to SEC enforcement actions for aiding and abetting a finder’s violation of the broker-dealer registration requirements. Besides SEC sanctions, the use of an unregistered broker-dealer brings the risk of rescission under federal and state securities laws. Involving finders in capital raising thus carries significant risks, and there is no safe harbor or clear distinction of a finder’s duties in the securities laws.
The SEC has issued some guidance to clarify the distinction between a legally operating finder and an unregistered broker-dealer. This guidance includes no-action letters, rules, and interpretations for M&A brokers, investment platforms, and crowdfunding participants.
Peter M. Hong, Partner at Stradley Ronon Stevens & Young; Eden L. Rohrer, Partner at K&L Gates and Lawrence P. Stadulis, Co-Chair, Fiduciary Governance at Stradley Ronon Stevens & Young, will analyze the legal pitfalls for securities issuers who utilize unregistered “finders” to solicit investors, the SEC’s restrictive position on permissible activities of finders, activities that require broker-dealer registration, and SEC regulatory actions regarding unregistered broker-dealers. The panel will also discuss the SEC’s focus on broker-dealer issues in the private fund market, the ICO market, as well as the online crowdfunding portal space, and recent enforcement actions.
The panel will review these and other key issues:
- What activities require broker-dealer registration with the SEC and FINRA?
- What penalties and actions do issuers face in using unregistered broker-dealers in their capital raising efforts?
- How do the SEC’s and FINRA’s guidance on finder activities in the M&A arena inform the permissible activities of finders in the securities and fund arenas?
Or call 1-800-926-7926
Ask for Use of Unregistered Finders to Solicit Investors on 6/25/2020
Mention code: UL5ST4-47UJAY