SEC open for public comment on proposed ‘finders’ exemptions

October 15, 2020
By: Connor LaVelle

"Finders," those who connect potential investors with issuers (e.g., startups seeking funding) within private markets, would not be required to register as brokers under recently proposed Securities and Exchange Commission (SEC) exemptions. Currently, individuals who work to connect investors and issuers — including simply providing issuers with a contact list and regardless of whether any advice is provided or whether the connection is made on behalf of one of the parties to any investment — may be required to register with the SEC as a broker.

The proposed rule, announced Oct. 7, defines two tiers of "finders": Tier I being limited to “providing contact information of potential investors in connection with only a single capital raising transaction by a single issuer in a 12 month period” with no investor contact; Tier II is more expansive, allowing ‘finders’ to communicate with investors on behalf of issuers, provided that they do not give “advice as to the valuation or advisability of the investment.”

Following the publication within the Federal Register on Oct. 13, the SEC will remain open to public comments regarding these potential exemptions for 30 days.

The SEC press release regarding these proposed exemptions may be found here, while the Federal Register entry, including commenting guidelines, may be found here. The SEC has also produced a chart breaking down the differences between Tier I finders, Tier II finders, and brokers.

sec, investing