Friday, June 03, 2016

California proposes broker-dealer registration exemption for finders

By Jay Fishman, J.D.

The California Department of Business Oversight has proposed a broker-dealer registration exemption for finders, namely those individuals who introduce investors to securities issuers. To qualify for the exemption, an individual would meet the “finder” definition and other requirements in the California Securities Law of 1968, and not be subject to either California or federal Regulation D, Rule 506(d) “bad boy” disqualification provisions.

Form filing (initial/renewal). Eligible individuals would file with the Department a Statement of Information for Finder Pursuant to Section 25206.1 of the California Corporations Code, accompanied by a $300 fee and any additional information the Commissioner requests. Finders would submit amendments to the Statement within 10 business days of the changes occurring. Finders would renew the exemption by annually filing the Statement accompanied by a $275 fee and any additional information the Commissioner requests.

Withdrawal. Finders would file the Statement within 15 calendar days of withdrawing from engaging in business under the exemption.

Recordkeeping. Finders would maintain and preserve the written agreement and other records for a statutory-prescribed time-period at a Statement-designated location. The records could be subject to Commissioner inspections at any time.

Prohibitions against fraud. California Securities Law prohibitions against fraud and misleading acts would apply to finders.

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