Today the SEC is holding a hearing prior to the release of a proposed exemption permitting financial finders to raise money for small businesses without violating the Federal law which classifies such finders as unregistered broker dealers.

Offer would be restricted to accredited investors and anti-fraud rules would still apply.

This relief has been sought for decades. As of now, a no-action SEC letter exempts finders in M&A transactions from broker status, subject to very detailed guidelines, but that exemption (not binding on private litigants or States) expressly excludes financial finders.

One issue seems to be that the proposed exemption will not eliminate State regulation and States have been, at least theoretically, very strict on defining finders as brokers. Whether they will follow the Federal lead, or whether ultimately the SEC will attempt to over-rule State law in this area, are important open questions.

No doubt the proposal will be subject to a public comment period. We await details. I will post periodically on the progress of this long-awaited SEC initiative. Kudos to Chairman Clayton for finally addressing this knotty issue.