An Overview of Finders’ Fees for MicroCap Professionals
Finders’ fees are a constant point of confusion for microcap management teams. Securities attorney Laura Anthony an overview of “The Payment Of Finders’ Fees- An Ongoing Discussion” on her blog.
In general, finders are still a very grey area of finance. Many agree that finders play an important role in helping small businesses source capital in situations too small for traditional broker-dealers. Unfortunately, the SEC has done little to provide clarity on the role and legality of finder.
As a result of the May 10th meeting of the SEC Advisory Committee on Small and Emerging Companies (ACSEC), the Committee recommended that the SEC take action in the near future to provide certainty in the context of finders and platforms involved in primary and secondary securities transactions. To date, the SEC has never actually defined ‘finders’. This is much to the disappointment of the Advisory Committee on Small and Emerging Companies.
In conclusion, Anthony says that “The payment of finders’ fees is a complex topic requiring careful legal analysis on a case-by-case and state-by-state basis. No agreements for the payment or receipt of such fees should be entered into or performed without seeking the advice of competent legal counsel.“
Anthony continues; “I am a strong advocate for a regulatory framework that includes (i) limits on the total amount finders can introduce in a 12-month period; (ii) antifraud and basic disclosure requirements that match issuer responsibilities under registration exemptions; and (iii) bad-actor prohibitions and disclosures which also match issuer requirements under registration exemptions.“
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