Finders and Unregistered Broker-Dealers: Understanding the Risks and Recent Developments

Avoiding the Pitfalls of Broker-Dealer Registration Violations, Lessons from Recent SEC Enforcement Actions and FINRA Guidance

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, December 6, 2016
Recorded event now available


This CLE webinar 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, and the regulatory actions taken by the SEC regarding unregistered broker-dealers and related FINRA rules. The panel will also discuss the SEC’s focus on broker-dealer issues involving finders in the private fund market and recent enforcement actions against fund managers.

Description

The SEC has been increasingly aggressive in bringing enforcement actions against those involved in transactions with unregistered broker-dealers. Recently, the SEC has imposed sanctions on private equity firms and managers for using unregistered broker-dealers. The SEC is also closely scrutinizing unregistered broker-dealer issues in its OCIE compliance exams of private investment funds.

Furthermore, 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. In addition to SEC sanctions, the use of an unregistered broker-dealer brings the risk of rescission under federal and state securities laws.

These events show that involving finders in capital raising brings significant risks, and there is no safe harbor or clear distinction of a finders duties in the securities laws.

The SEC and FINRA have 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. Further regulatory action also seems likely.

Listen as our authoritative panel of securities practitioners discusses legal pitfalls for securities issuers using unregistered “finders” to solicit capital and the SEC’s position on permissible activities of unregistered brokers.

Outline

  1. SEC securities laws applicable to activities of unregistered finders
  2. JOBS Act exemption from broker-dealer registration in Rule 506 offerings
  3. SEC and FINRA regulatory guidance and enforcement actions regarding permissible activities of finders
  4. SEC OCIE examination of broker-dealer issues in activities of private investment funds

Benefits

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 and FINRA’s guidance on finder activities in the M&A arena inform the permissible activities of finders in the securities and fund arenas?

Faculty

Steven R. Watts, Partner
Dinsmore & Shohl, Dayton, Ohio

Mr. Watts concentrates his practice in the areas of corporate and securities law representing public and private companies in capital markets, mergers & acquisitions and securities transactions and compliance. His experience includes private equity fund formation and joint ventures, public and private M&A, registered and exempt securities offerings, Exchange Act reporting, corporate governance, investment adviser regulation, finance/accounting, general corporate and business matters.

Parker B. Morrill
Clyde Snow & Sessions, Salt Lake City

Mr. Morrill regularly assists clients in their efforts to raise capital, comply with various regulations, complete significant transactions and respond to inquiries from regulators. He has significant experience advising clients on compliance with federal and state securities laws, in both public and private offerings, and has extensive knowledge of the rules and operations of the U.S. Securities and Exchange Commission (SEC). He also regularly advises clients on corporate governance, mergers and acquisitions, private equity and stock exchange listing requirements.

Arina Shulga, Atty
Shulga Law Firm, New York

Ms. Shulga focuses her practice on corporate and securities matters. She has significant experience in startup law, securities offerings and SEC reporting obligations, cross-border transactions, corporate governance, private and public company representation, periodic reporting filings for public companies, and business entity formation. She has represented startups and Fortune 500 companies in a variety of industries.


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Thompson Hine

Mark N. Berman

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