This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 24, Series 62, and Series 82):
Sparkly Jewelry Inc. uses a finder to help identify potential investors for a private placement of securities. Which of the following activities would not require the finder to register as a broker-dealer?
Answers:
A. The finder invites potential customers to an informal talk describing the seminar
B. The finder receives a commission when a potential investor invests in the private placement
C. The finder introduces potential investors to the issuer
D. The finder describes the benefits of the private placement to investors
Correct Answer: C.
Rationale: Issuers sometimes use finders to locate potential investors for private placements. Finders may be registered broker-dealers, but they do not need to be. Finders are not required to be registered broker-dealers if they limit their activities to introducing potential investors to an issuer. They cannot promote or recommend securities to a prospective investor, develop terms, or negotiate for either the issuer or the investor.Their compensation must be a flat fee or a percentage fee that is not contingent on the closing of a securities sale. Form D requires issuers to disclose any finder’s fees.
Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.