New Finder Rules Being Pushed-For

2 Replies

Some of the CFIRA folks and a handful of others appear to be pushing hard for clarity and a modification of current "finder" laws for finding accredited investors.  Check out this link:

Finder Overhaul?


1. The Commission take steps to clarify the cunent ambiguity in broker-dealer regulation by determining that persons that receive transaction-based compensation solely for providing names of or introductions to prospective investors are not subject to registration as a broker under the Securities Exchange Act. 

2. The Commission exempt intermediaries that are actively involved in the discussions, negotiations and structuring, as well as the solicitation of prospective investors, for private financings on a regular basis from broker registration at the federal level, conditioned upon registration as a broker under State law. 

3. The Commission spearhead a joint effort with the North American Securities Administrators Association and the Financial Industry Regulatory Authority to ensure coordinated State regulation and adoption of measured regulation that is transparent, responsive to the needs of small businesses for capital, proportional to the risks to which investors in such offerings are exposed, and capable of early implementation and ongoing enforcement. 

4. The Commission should take immediate intermediary steps to begin to address issues regarding the regulation of intetmediaries in small business capital formation transactions incrementally instead of waiting until development of a comprehensive solution.

This would be a very big deal for the crowdfunding industry if it was adopted.  

Since #3 and #4 are rather vague, I'll focus my questions on the first two-

#1- Isn't this what listing platforms (Crowdstreet, Real Crowd) do? they charge a fee to the sponsor to list their projects and provide them the platform with access to their registered investors? I wasn't aware that they had concerns with this issue.

#2- This looks like a bigger deal.  Would this allow the platform to receive commissions for successful capital raises without affiliating with a broker dealer?

Number 1 has to do with finders.  Right now there isn't an easy way to compensate people that introduce new investors to platforms without navigating ridiculous rules.  

Number 2 seeks to clarify the ambiguity that currently resides in the law around registration as a broker-dealer.  There are better exemptions in some states than there are in others to my knowledge.  Texas has some bright line tests, but others may not.  

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