Series 79: 10.4.2.1. Finders

10.4.2.1. Finders

Instead of (or in addition to) a placement agent, issuers may employ one or more finders to locate potential investors. Finders may be registered broker-dealers, but are not required to be, as long as they limit their activities to introducing prospective investors to an issuer. Unregistered finders cannot by law promote or recommend securities to a prospective investor, develop terms, or negotiate for either the issuer or investor. Moreover, unregistered finders’ compensation must be either a flat fee or a percentage fee that is not contingent on the closing of a securities sale. Issuers are required to disclose any finder’s fees.

Registered broker-dealers and registered representatives are generally prohibited from splitting their compensation with an unregistered finder. However, under certain circumstances, a registered broker-dealer may share its compensation with an unregistered foreign finder who brings in a foreign investor. (A foreign finder is simply a foreign entity acting as a