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 SEC Guidance

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


Conducted on Thursday, June 25, 2020

Recorded event now available

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Program Materials

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, 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.

Description

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.

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.

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Outline

  1. Securities laws applicable to activities of unregistered broker-dealers
  2. Broker-dealer issues arising in the operation of online crowdfunding portals as well as websites involved in the offerings of digital assets
  3. JOBS Act exemption from broker-dealer registration in Rule 506 offerings
  4. Regulatory guidance and enforcement actions
  5. SEC OCIE examination of broker-dealer issues in activities of private investment funds
  6. State rules related to finders and M&A brokers

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'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?

Faculty

Hong, Peter
Peter M. Hong

Partner
Stradley Ronon Stevens & Young

Mr. Hong uses his many years of service at the SEC and the CFTC to guide clients through the various regulatory...  |  Read More

Rohrer, Eden
Eden L. Rohrer

Partner
K&L Gates

Ms. Rohrer concentrates her practice in securities broker-dealer regulatory, compliance, enforcement defense,...  |  Read More

Stadulis, Lawrence
Lawrence P. Stadulis

Co-Chair, Fiduciary Governance
Stradley Ronon Stevens & Young

Mr. Stadulis advises clients in matters pertaining to the registration and regulation of investment advisers and...  |  Read More

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