Tagged: finder’s fee

Capital Markets / Securities

The Perils of Finder’s Fees (Revisited)

Way back in 2017, one of our earliest posts discussed the legal and financial risks to both the issuer and the finder if an issuer pays a finder’s fee in connection with a sale of securities in the United States, and the person receiving the fee is not a U.S. registered broker-dealer. In many cases, this type of fee violates U.S. securities laws. However, this continues to occur from time to time, especially in deals where U.S. counsel is not consulted prior to the closing. For a brief summary of the risks of paying this type of finder’s fee, and an example of one issuer that declared bankruptcy as a result, read on....

Capital Markets / Securities

The Danger of Paying Finder’s Fees to Unregistered Broker-Dealers

We get asked from time-to-time whether it is advisable for issuers to pay fees to unregistered “finders” for introducing potential investors in the United States to the issuer in connection with securities offerings. The short answer is “no.” Most finders are engaged by issuers under finder’s, advisory, or other arrangements, which typically require payment of “success fees” upon completion of a financing transaction. While these arrangements are sometimes structured to try to hide or disguise the true intent of the arrangement, payment of transaction-based compensation is treated by U.S. securities regulators as a nearly-conclusive indication that a person is engaged in the securities business and should be registered as a broker-dealer. The relevant...