Series 24: 2.3.4.1. Unregistered Persons

2.3.4.1.  Unregistered Persons

Finders. A broker-dealer may employ a finder to locate potential investors. Finders may be other broker-dealers, but usually they are not. Finders are not required to be registered as broker-dealers as long as they limit their activities to introducing prospective investors to issuers or broker-dealers, and the introductions do not occur more than once. Finders cannot by law promote or recommend securities to a prospective investor, develop terms, or negotiate for either the issuer or investor. Moreover, they must base their compensation on either a flat fee or a percentage fee that is not contingent on the closing of a securities sale. Registered broker-dealers and registered representatives are generally prohibited from splitting their own compensation with an unregistered finder.

Foreign finders. However, member firms may share their compensation with unregistered foreign finders, provided that:

• • The member firm is sure that the finder does not need to register as a broker-dealer in the U.S. and the compensation arrangement doesn’t violate foreign law.
• • The finder is a foreign national (not a U.S