SEC Proposes Limited Exemption for Finders

On Oct. 7, 2020, the SEC, by a 3-2 vote, proposed a conditional exemption from the broker-dealer registration requirements of Section 15(a) of the Securities Exchange Act of 1934, as amended, for natural persons who assist issuers with raising capital in private markets from “accredited investors” (“Proposal”). The Proposal provides long-sought guidance regarding payment of transaction-based compensation to unregistered persons, commonly referred to as “finders,” who engage in limited securities-related activities to raise funds on behalf of issuers. In this article, partners Marc Elovitz, Craig Warkol and former Schulte lawyers Brian Daly and Jacqueline Srour discuss the impact of the proposal on broker-dealers.