Update: Finder Relief

In early October, I posted that the SEC had proposed break-through action to create guidance under which finders in securities financings could proceed safely, under Federal law, without registering as broker-dealers. A proposal decades in the making, the matter was thrown open for public comment.

Today is a meeting of the SEC’s Small Business Capital Formation Advisory Committee, where there will be discussion of the proposal (open for comment through this Thursday). The Committee is asked to discuss comments to date, the most important of which is that the proposed SEC pronouncement might be ineffective unless it also expressly negated State laws which also require broker registration for finders in most instances. This was a problem flagged in our earlier post.

Whether the SEC, which is proceeding in informal fashion here, would be able to in fact preempt State regulations without going through a formal Rule-making process is not clear to me, and how the election results might impact the entire project given two negative votes originally cast by the Democratic Commissioners, is confusing the process.

Other comments to date have centered around whether the exemption should apply also to secondary offerings, and whether the exemption, framed as applying only to individuals, should also apply to firms.

The Committee, per its name, is only Advisory. What the Commission will, or can, do before year-end will be interesting to see. If any startling recommendations come from today’s meeting I will report.

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