Those who introduce investors to companies seeking financing (“finders”) have had an historically uneven regulatory history.  Although there were moments in time when a finder, receiving compensation, did not run afoul of the SEC as being an unregistered broker-dealer, for the most part (and today) such finders typically are undertaking an illegal action in receiving compensation; and such action taints the fund-raising itself, perhaps creating a recission right on the part of all investors and regulatory action against the company itself.

Half a decade ago, the SEC toyed with an amendment to its regulatory scheme to define a safe harbor path for finders who were not registered BDs, provided their role in the fundraising process was narrow and within specific parameters.  The SEC finally granted a path for unregistered compensated finders in M&A transactions (now on the books) but balked at extending relief to finders in a pure corporate finance mode.

Republican SEC commissioners in the past have always been inclined to relax regulation of finders in the interests of free flow of capital and ease in financing new enterprises.  Today, the Republican majority of commissioners is pushing a variety of liberalizations of SEC regulatory practice, and has announced last week that at the Commission meeting a week from today they will reconsider the abandoned 2020 proposal to permit small businesses to compensate financial finders.

It is unclear whether the 2020 proposal itself will be discussed and it is premature to suggest what may eventuate.  It should be noted that there will remain objection to the entire enterprise; the broker dealer community not surprisingly is opposed (this would cut into the market for BDs), FINRA (the broker-dealer regulatory body) has always been opposed, and state regulators historically have been fearful of unregulated and unprofessional fund-raising that might create risk to the investor community.

I will try to get an inkling of what is afoot on the 22nd, and likely will be aided by releases by the various commissioners, or a public announcement of a regulatory process, coming out of that meeting.

Future promised regulatory relief from the SEC is anticipated also for the operation of SPACs (public acquisition companies) and crypto.  So it will be an interesting season for the SEC!