Proposed SEC Regulations for Finders – Harvard Grace



Today we’re talking about raising capital for your small business and some new proposed SEC regulations. Check out our YouTube channel and Laura Anthony’s Securities Law Blog for more on the topic!

Most of you probably know that for anyone to help you or help a company raise capital for their business, they have to be someone who’s either an officer of your company or a registered broker dealer. Broker dealers are under a lot of regulations and have a lot of rules they have to follow. Those rules change often, and generally when they change, they get stricter.

The SEC has just proposed some new rules for what we call finders. You’ve heard of finders fees, but this is a new category of person who can be compensated for helping you to raise capital, either as as a commission or as a consultant.

Now keep in mind, these are just proposed rules, but they break down kind of like this: there are two tiers of finders. Tier 1 would be more of a one-off type of a situation where somebody just helped introduce you to some investors. Then there’s tier of people who are more in the business of doing this for a living. Most of these new rules regulate the company issuing the stock or the company raising the capital, and they only apply if the company is relying on an exemption under Regulation D or Regulation A. The way the proposed rule explains it is that those companies are not required to make any filings with the SEC for Reg A or Reg D deals.

There’s also going to be a limit on how much money can be raised, with a proposed 5 million or less. Clearly the SEC is looking to loosen rules in order to help small businesses raise small amounts of capital, because most small businesses are not are not raising enough capital and certainly can’t afford the fees associated with professional investment bankers. So we have a hole in the market, and the SEC is trying to make regulations to fill that hole. There’s no date yet on when they will become effective, but we will be watching!

If you are involved in any capital raises with your clients, let us know if there’s any way that Harvard Grace can help you.



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