Thursday, July 06, 2017

California adopts finder exemption

By Jay Fishman, J.D.

The California Department of Business Oversight has adopted a broker-dealer registration exemption for finders, namely those individuals who introduce investors to securities issuers. To qualify for the exemption, an individual must 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 must 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. The form includes language that a finder can voluntarily, but is not required to, provide his social security number. Finders must submit amendments to the Statement within 10 business days of the occurrence of a change. Finders may renew the exemption by annually filing the Statement accompanied by a $275 fee and any additional information the Commissioner requests.

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

Recordkeeping. Finders must maintain and preserve the written agreement and other records for a statutory-prescribed time-period at a Statement-designated location. The records are subject to commissioner inspection at any time.

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

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