Securities and Exchange Commission.
Notice of proposed exemptive order; request for comment.
Pursuant to Sections 15(a)(2) and 36(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), the Securities and Exchange Commission (“SEC” or “Commission”) is proposing to grant exemptive relief to permit natural persons to engage in certain limited activities on behalf of issuers (“Finders”), without registering as brokers under Section 15 of the Exchange Act. The proposed exemption provides for two classes of Finders, Tier I Finders and Tier II Finders, with corresponding conditions as described below.
Comments should be received on or before November 12, 2020.
Comments may be submitted by any of the following methods:
- Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number S7-13-20. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (http://www.sec.gov/rules/exorders.shtml). Comments also are available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly.
Start Further Info
FOR FURTHER INFORMATION CONTACT:
Emily Westerberg Russell, Chief Counsel; Joanne Rutkowski, Assistant Chief Counsel; Timothy White, Senior Special Counsel; Geeta Dhingra, Special Counsel; and Darren Vieira, Special Counsel, Office of Chief Counsel, Division of Trading and Markets, at (202) 551-5550, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-8549.
End Further Info
Start Supplemental Information
The Commission's mission includes facilitating capital formation—not only for public companies, but also for the small businesses that are active participants in our private markets. Our dynamic markets and economy significantly benefit from a robust pipeline of new small businesses, which create the majority of net new jobs in the United States 
and greatly contribute to innovation.
Small and emerging companies—from start-ups seeking their initial seed funding to businesses on a path to become a public reporting company—require capital to grow and scale.
One of the ways that Start Printed Page 64543small businesses may seek to access critical capital needed to grow and scale is through offerings conducted in reliance on an exemption from registration under the Securities Act of 1933 (“Securities Act”).
The exempt market supports the capital needs of many small companies that contribute substantially to our economy.
Small business investors play a critical role in fostering the growth and success of small companies.
For example, investors can provide expertise as well as financial capital to support the businesses' strategic growth.
Observers have noted, however, that small businesses frequently encounter challenges connecting with investors in the exempt market, particularly in regions that lack robust capital raising networks.
According to the 2017 Treasury Report, “[f]or a small business seeking to raise capital, identifying and locating potential investors can be difficult. It becomes even more challenging if the amount sought (e.g., less than $5 million) is below a level that would attract venture capital or a registered broker-dealer, but beyond the levels that can be provided by friends and family and personal financing. The number of registered broker-dealers has been falling, and few registered broker-dealers are willing to raise capital in small transactions.” 
In areas that lack robust venture capital (“VC”) 
and angel investor 
networks, so-called “finders,” who may identify and in certain circumstances solicit potential investors, often play an important and discrete role in bridging the gap between small businesses that need capital and investors who are interested in supporting emerging enterprises.
Finders may also help bridge gaps between traditionally underrepresented founders, such as women and minorities 
and VC and start-up capital.
A long-standing issue in the area of broker regulation concerns the regulatory status of these persons who play a discrete role in bridging the gap between small businesses and investors. Concerns have been raised that “identifying potential investors is one of the most difficult challenges for small businesses trying to raise capital . . . [yet] companies that want to play by the rules struggle to know in what circumstances they can engage a `finder' or a platform that is not registered as a broker-dealer.” 
Observers have described a “gray market,” reflecting a “major disconnect” between the various laws and regulations applicable to securities brokerage activities, and the methods and practices by which capital is raised to fund early stage businesses in the United States.
As a result of this uncertainty, individuals potentially could be engaging in unregistered brokerage activity, or alternatively, not serving the market because of the regulatory uncertainty associated with playing even a limited role in a capital raise.
Over the years, there have been many calls for Commission action in this area. In 2005, the ABA Task Force recommended that the Commission work with the Financial Industry Regulatory Authority (“FINRA,” which was then the National Association of Securities Dealers) and state regulators to establish a simplified system that would allow persons to solicit investors for small issuers, subject to a reduced, but appropriate, level of regulation.
In Start Printed Page 64544recent years, the U.S. Department of the Treasury recommended that the SEC, FINRA, and the states propose a new regulatory structure for finders and other intermediaries in capital-forming transactions; 
the former SEC Advisory Committee on Small and Emerging Companies (the “ACSEC”) 
recommended that the Commission address questions regarding whether and under what circumstances small issuers can engage a finder or other intermediary that is not a registered broker-dealer, highlighting the importance of finders for small business capital formation; 
and the current SEC Small Business Capital Formation Advisory Committee (the “SBCFAC”) recommended that the Commission adopt a clear framework for unregistered finders in light of their role as intermediaries in fostering capital formation for smaller businesses.
The status of these intermediaries has also been a concern for participants in the SEC Government-Business Forum on Small Business Capital Formation (“Small Business Forum”). The Small Business Forum has repeatedly recommended that the Commission address the status of finders, including recommendations that finders should be exempt from the requirement to register as broker-dealers, and that the Commission should define permissible activities in which finders can engage without being deemed as engaging in activities that require broker registration.
In August 2019, the Small Business Forum's Small, Emerging Businesses breakout group and the Mature and Later Stage Private Companies breakout group both made recommendations related to finders, indicating a broad market perception that additional clarity and possibly relief may be needed in this area.
Further, at the Small Business Forum in June 2020, participants made a recommendation related to finders.
Against this background, and given the role of intermediaries with respect to capital formation and investor protection, especially for smaller issuers, the Commission believes it is important to address the regulatory status of persons who engage in certain limited securities-related activities on behalf of issuers. The Commission preliminarily believes that this exemption would provide clarity to investors and issuers, and establish clear lanes for both registered broker activity and limited activity by finders that would be exempt from registration.
II. Broker Regulatory Framework
Because of the broker's role as an intermediary between customers and the securities markets, broker-dealers are required to register with the Commission unless they can rely on an exception or exemption.
Registered broker-dealers are subject to comprehensive regulation under the Exchange Act and under the rules of each self-regulatory organization (“SRO”) of which the broker-dealer is a member, including a number of obligations that attach when a broker-dealer makes recommendations to a customer, as well as general and specific requirements aimed at addressing certain conflicts of interest.
Start Printed Page 64545
Section 3(a)(4) of the Exchange Act generally defines a “broker” as “any person engaged in the business of effecting transactions in securities for the account of others.” 
Section 15(a)(1) of the Exchange Act, in turn, generally makes it unlawful for any broker to use the mails or any other means of interstate commerce to “effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security” unless that broker is registered with the Commission in accordance with Section 15(b) of the Exchange Act.
As a result, absent an available exception or exemption,
a person engaged in the business of effecting transactions in securities for the account of others is a broker required to register under Section 15(a) of the Exchange Act.
The question of whether a person is a broker within the meaning of Section 3(a)(4) turns on the facts and circumstances of the matter. Because the Exchange Act does not define what it means to be “engaged in the business” or “effecting transactions,” courts and the Commission have looked to an array of factors in determining whether a person is a broker within the meaning of the statute.
Often, a key consideration in these determinations is whether the person participates on a regular basis in securities transactions at key points in the chain of distribution.
Over the years, the courts and the Commission have identified certain activities as indicators of broker status, including: (1) Actively soliciting or recruiting investors; 
(2) participating in negotiations between the issuer and the investor; 
(3) advising investors as to the merits of an investment or opining on its merits; 
(4) handling customer funds and securities; 
(5) having a history of selling securities of other issuers; 
and (6) receiving commissions, transaction-based compensation or payment other than a salary for selling the investments.
This is not an exhaustive list of the relevant factors, and no one factor is dispositive.
A person who identifies and solicits potential investors for an issuer or other party could be viewed as engaging in activity that indicates broker status.
The courts and the Commission generally have viewed solicitation as any affirmative effort intended to induce a securities transaction, including, but not limited to, telephone calls, mailings, advertising (online or in print), and conducting investment seminars.
Solicitation includes efforts to induce a single securities transaction as well as efforts to develop an ongoing securities-business relationship.
Although it is not required to establish broker status and is not in itself determinative of broker status, the receipt of transaction-based compensation in connection with securities activities, such as solicitation of potential investors, has been considered by courts as a factor indicating that registration as a broker may be required.
While some courts have discussed the issue of finders, their interpretations have varied, and address the facts and circumstances of the specific matter.
The Commission has not previously recognized a “finders” exemption or exception, nor has the Commission broadly addressed whether and under what circumstances a person may “find” or solicit potential investors on behalf of an issuer without being required to register as a broker, or even whether such activity implicates the Commission's regulatory regime for brokers.
Instead, the Commission Start Printed Page 64546understands that market participants have looked to staff no-action letters discussing circumstances under which persons act as “finders” without registering as a broker-dealer.
In particular, in connection with private placements, the Commission understands that market participants may look to the Paul Anka staff no-action letter with respect to broker registration under Section 15(a) of the Exchange Act.
In the Paul Anka Letter, the staff stated that it would not recommend enforcement action to the Commission under Section 15(a) of the Exchange Act against an individual who, without registering with the Commission as a broker-dealer: (1) Entered into an agreement with an issuer to provide to the issuer a list of names and telephone numbers of potential investors he reasonably believed to be accredited investors and with whom he had a pre-existing business or personal relationship, (2) had no further contact with potential investors concerning the issuer, and (3) received a finder's fee for doing so.
As noted above, Commission staff has responded over the years to other requests for staff statements in relation to broker status issues, similar to those in the Paul Anka Letter. Differences in the facts and circumstances can lead to different results. In some matters, the staff provided the no-action statement that was requested.
A number of the no-action letters in this area, for example, involve persons seeking to facilitate the sale of a business or a controlling interest therein, a fact pattern different from that presented in the Paul Anka Letter.
But in certain other matters, the staff has declined to provide such statements.
III. Proposed Exemption for Finders
The Commission acknowledges that so-called “finders” may play an important role in facilitating capital formation, particularly for smaller issuers. At the same time, the absence of a regulated intermediary may raise investor protection concerns. The Commission preliminarily believes that there are situations where the need to impose the broker registration requirement may be mitigated by other factors.
Accordingly, the Commission is proposing to grant exemptive relief pursuant to Sections 15(a)(2) 
and 36(a)(1) 
of the Exchange Act to permit a natural person to engage in certain defined activities on behalf of an issuer (a “Finder”) without registration as a broker, subject to the conditions described below.
The proposed exemption would provide a non-exclusive safe harbor from broker registration. The safe harbor is intended to provide clarity with respect to the ability of a Finder to engage in certain activities without being required to register as a broker under Section 15(a).
Accordingly, no presumption shall arise that a person has violated Section 15(a) of the Exchange Act if such person is not within the terms of the proposed exemption; rather—consistent with how questions under Section 15(a) have been evaluated—it would depend on the facts and circumstances of the situation.
Specifically, the Commission is proposing to exempt two classes of Finders, Tier I Finders and Tier II Finders, as described below, based on the types of activities in which they are permitted to engage, and with conditions tailored to the scope of their activities. The Commission's proposed relief is intended to be narrowly-tailored and seeks to address the capital formation needs of certain smaller issuers while preserving appropriate investor protections.
The proposed exemption for Tier I and Tier II Finders would be available only where:
- The issuer is not required to file reports under Section 13 or Section 15(d) of the Exchange Act;
- The issuer is seeking to conduct the securities offering in reliance on an Start Printed Page 64547applicable exemption from registration under the Securities Act; 
- The Finder does not engage in general solicitation;
- The potential investor is an “accredited investor” as defined in Rule 501 of Regulation D or the Finder has a reasonable belief that the potential investor is an “accredited investor”;
- The Finder provides services pursuant to a written agreement 
with the issuer that includes a description of the services provided and associated compensation;
- The Finder is not an associated person of a broker-dealer; and
- The Finder is not subject to statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act, at the time of his or her participation.
Limiting the proposed exemption to activities on behalf of issuers that are not required to report under the Exchange Act and in connection with offers and sales of securities made in reliance on an applicable exemption from registration under the Securities Act is intended to address concerns that have been raised over the years regarding the perceived inability of smaller companies to engage the services of a broker-dealer to assist with opportunities to raise capital in exempt offerings.
Smaller companies, particularly smaller private companies, may be more likely to rely on the exemptions from registration, given the initial and ongoing costs associated with conducting a registered offering and becoming an Exchange Act reporting company.
Although relatively smaller issuers that are required to report under the Exchange Act may also encounter difficulty raising capital in exempt offerings as compared to larger Exchange Act reporting issuers, we have proposed limiting this relief to non-Exchange Act reporting issuers because we believe these non-reporting issuers may be the types of companies most likely to experience difficulty obtaining the assistance of a broker-dealer, and are therefore most likely to need the assistance of a Finder when seeking to raise capital in such offerings.
The proposed exemption would also require that a Finder not engage in general solicitation of potential investors, and that the potential investors be “accredited investors” or investors that the Finder has a reasonable belief 
are “accredited investors,” as defined in Rule 501 of Regulation D.
These proposed requirements are intended to provide investor protection by limiting the scope of potential investors with whom Finders are permitted to engage on behalf of an issuer.
The accredited investor requirement is intended to ensure that Finders solicit only potential investors who have a sufficient level of financial sophistication to participate in investment opportunities that do not have the additional protections provided by registration under the Securities Act.
Accredited investors currently provide the vast majority of early-stage capital to small businesses through exempt offerings,
where they often invest directly without the engagement of an intermediary. We believe the targeted approach we are proposing would address the capital raising needs of smaller issuers while maintaining appropriate investor protections.
The requirement that a Finder enter into a written agreement 
with the issuer that includes a description of the services provided and associated compensation is intended to explicitly define the role of the Finder consistent with the terms of the proposed exemption and, in turn, establish accountability between the parties.
Next, a Finder cannot be an associated person of a broker-dealer as defined under Section 3(a)(18) of the Exchange Act.
The Commission believes this Start Printed Page 64548condition is appropriate because of the potential for investor confusion and abusive sales tactics when the Finder is also associated with a broker-dealer.
Therefore, the relief provided by the proposed exemption should not be necessary or available to such persons. This condition is intended to ensure that regulated persons do not attempt to circumvent applicable rules and regulations to which they are already subject, including their required standard of conduct when providing recommendations.
Finally, a Finder cannot rely on the exemption during a time he or she is subject to statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act.
The Commission preliminarily believes that any person subject to the provisions described in Section 3(a)(39) should not be able to rely on this exemption as we believe there is potential for abusive practices where persons who are subject to a statutory disqualification participate in securities transactions without the assurance of adequate supervision or regulatory oversight.
Tier I Finders. For purposes of the proposed exemption, a “Tier I Finder” is defined as a Finder who meets the above conditions 
and whose activity is limited to providing contact information of potential investors in connection with only one capital raising transaction by a single issuer within a 12-month period,
provided the Tier I Finder does not have any contact with the potential investors about the issuer. The contact information may include, among other things, name, telephone number, email address, and social media information. The Commission preliminarily believes limiting the exemption to this activity will appropriately narrow the role of the Tier I Finder to preclude the participation in continuous or multiple sales of securities by persons that are not subject to broker-dealer registration or to the heightened requirements of Tier II Finders. A Tier I Finder that complies with all of the conditions of the exemption may receive transaction-based compensation for the limited services described above without being required to register as a broker under Section 15(a) of the Exchange Act.
Tier II Finders. The Commission is also proposing an exemption that would permit a Finder, where certain conditions are met, to engage in additional solicitation-related activities beyond those permitted for Tier I Finders. For purposes of the proposed exemption, a “Tier II Finder” is defined as a Finder who meets the above conditions,
and who engages in solicitation-related activities on behalf of an issuer, that are limited to: (i) Identifying, screening, and contacting potential investors; 
(ii) distributing issuer offering materials to investors; (iii) discussing issuer information included in any offering materials,
provided that the Tier II Finder does not provide advice as to the valuation or advisability of the investment; 
and (iv) arranging or participating in meetings with the issuer and investor.
As discussed above, the Commission generally views solicitation as any affirmative effort to induce or attempt to induce a securities transaction 
and broadly views these activities of Tier II Finders to constitute solicitation. The identification of these activities is not an exhaustive listing of activities that may constitute solicitation. Rather, these are the limited solicitation-related activities permissible under the proposed exemption.
The Commission preliminarily believes that limiting the proposed exemption to these specified activities associated with solicitation, along with the additional conditions discussed below, will appropriately narrow the role of the Tier II Finder to support the proposed exemption.
A Tier II Finder wishing to rely on the proposed exemption would need to satisfy certain disclosure requirements and other conditions: 
First, the Tier II Finder would need to provide a potential investor, prior to or at the time of the solicitation, disclosures that include:
(1) the name of the Tier II Finder;
(2) the name of the issuer;
(3) the description of the relationship between the Tier II Finder and the issuer, including any affiliation;
(4) a statement that the Tier II Finder will be compensated for his or her Start Printed Page 64549solicitation activities by the issuer and a description of the terms of such compensation arrangement;
(5) any material conflicts of interest resulting from the arrangement or relationship between the Tier II Finder and the issuer; and
(6) an affirmative statement that the Tier II Finder is acting as an agent of the issuer, is not acting as an associated person of a broker-dealer, and is not undertaking a role to act in the investor's best interest.
The Commission is proposing to allow a Tier II Finder to provide such disclosure orally, provided that the oral disclosure is supplemented by written disclosure and satisfies all of the disclosure requirements listed above no later than the time of any related investment in the issuer's securities.
The Commission preliminarily believes that this disclosure would direct an investor's attention to important information, such as the fact that the Tier II Finder is paid by the issuer and any associated material conflicts of interest, in order to facilitate the investor's ability to evaluate the role of the Tier II Finder. In addition, the Commission believes the disclosure should be made “prior to or at the time of the solicitation” so that investors have this important information early enough in the process to give the investor adequate time to consider the information in order to make informed investment decisions.
While the Commission is requiring that the disclosures be written, we believe this can be satisfied either through paper or electronic means.
For purposes of this proposed exemption, we believe that delivery of the disclosure would be evidenced by the acknowledgment required below.
The Tier II Finder must obtain from the investor, prior to or at the time of any investment in the issuer's securities, a dated written acknowledgment of receipt of the Tier II Finder's required disclosures. While the Commission is requiring that the acknowledgment be written, we believe this can be satisfied either through paper or electronic means, similar to the disclosure condition discussed above.
The Commission believes this acknowledgment is important as it helps ensure that the investor received the required disclosures.
Because Tier II Finders may participate in a wider range of activity and have the potential to engage in more offerings with issuers and investors, the Commission believes that heightened requirements are appropriate. A Tier II Finder that complies with all of the conditions of the proposed exemption may receive transaction-based compensation for services provided in connection with the activities described above without being required to register as a broker under Section 15(a) of the Exchange Act.
The Commission preliminarily believes that the proposed exemption is narrowly drawn to permit a limited set of activities, subject to conditions intended to address investor protection concerns, including the requirement that any potential investors solicited under this proposed exemption be accredited investors or investors the Finder has a reasonable belief are accredited investors. In addition, Tier II Finders, who will interact with potential investors, must provide those investors with appropriate disclosures of the Tier II Finder's role and compensation.
Because a Finder would engage in a limited scope of securities-related activities with a limited set of investors, would be subject to conditions commensurate with the level of activity, and would not handle customer funds or securities or have the power to bind the issuer or the investor, the Commission preliminarily believes that the investor protection concerns that otherwise would be addressed by registration as a broker and the related requirements in the limited circumstances contemplated by the exemption should be addressed by the conditions of the proposed exemption for each tier of Finders. In particular, the disclosure requirement for Tier II Finders should help to increase investor awareness of the scope of the Finder's relationship with the issuer and potential conflicts of interest, and as a result help to facilitate an informed investment decision.
Consistent with the narrow scope of activities contemplated by the proposed exemption, as noted above, a Finder could not be involved in structuring the transaction or negotiating the terms of the offering.
A Finder also could not handle customer funds or securities or bind the issuer or investor; participate in the preparation of any sales materials; perform any independent analysis of the sale; engage in any “due diligence” activities; assist or provide financing for such purchases; or provide advice as to the valuation or financial advisability of the investment.
The proposed exemption would apply only with respect to the defined activities for each tier of Finder and is limited to activities solely in connection with primary offerings. A Finder could not rely on this proposed exemption to engage in broker activity beyond the scope of the proposed exemption, such as to facilitate a registered offering, a resale of securities, or the sale of securities to investors that are not accredited investors or that the Finder does not have a reasonable belief are accredited investors. The Commission preliminarily believes these are important safeguards that operate as a constraint on the conduct of Finders.
If a Finder fails to comply with any of the relevant conditions (for example, the Finder engages in general solicitation of potential investors), the Finder could not rely on the proposed exemption. The inability to rely on the proposed exemption means that the Finder may need to consider whether it is required to register with the Commission as a broker under Section 15(a) of the Exchange Act.
There are two important principles embodied in our regulatory framework that are not affected by this exemption. Significantly, this exemption would not affect a Finder's obligation to continue to comply with all other applicable laws, including the antifraud provisions of the Securities Act and the Exchange Act, such as the obligations under Section 10(b) and Rule 10b-5 under the Exchange Act, and state law. In Start Printed Page 64550addition, this exemption is not intended to affect the rights of the Commission or any other party to enforce compliance with other applicable law, or the available remedies for violations of the law. Further, regardless of whether or not a Finder complies with this exemption, it may need to consider whether it is acting as another regulated entity, such as an investment adviser or a municipal advisor. An exemption from the obligation to register as a broker-dealer does not insulate a person from the registration requirements of the Advisers Act if such person is acting as an investment adviser.
Thus, the Commission preliminarily believes that the proposed exemption would be consistent with the public interest and protection of investors, and would also provide issuers with greater access to investment capital and investors with access to investment opportunities. Specifically, the proposed conditions for both Tier I Finders and Tier II Finders should sufficiently restrict the scope of the proposed exemption such that permitting limited activities associated with solicitation in this narrow context would not implicate the need for regulation of these activities under the broker regulatory framework. At the same time, the proposed exemption would permit Finders to play an important role in facilitating capital formation for small businesses, consistent with many of the various recommendations put forth through the years.
Accordingly, for the reasons discussed above, the Commission preliminary believes that the proposed conditional exemption would be consistent with the public interest and the protection of investors and would be necessary or appropriate in the public interest.
IV. Request for Comments
The Commission is seeking comment on all aspects of the proposed exemption. In particular, the Commission requests comment on the following questions as well as the potential costs and benefits of the proposed exemption. When responding to the request for comment, please explain your reasoning.
1. Have we accurately and completely identified the legal uncertainties, if any, around the involvement by Finders in connecting investors with small firms in need of capital?
2. Have we appropriately defined Tier I Finders and Tier II Finders? Should there be two tiers of Finders or instead should there be multiple tiers of Finders? Should there be only one tier of Finders?
3. Should the definition of Finder be limited to natural persons?
4. Should the definition of Finder be limited to a natural person resident in the U.S.? 
5. Have we appropriately identified the activities in which each tier of Finder should and should not be able to engage? Does the proposed exemption provide a workable path for Finders to be engaged in this activity?
6. Have we appropriately limited the types of investors whom a Finder can “find” or solicit? Instead of limiting potential investors to those the Finder reasonably believes are accredited investors, should investors identified by Finders be subject to investment limitations, regardless of the exemption being relied upon, such as a dollar limit on the size of the investment? If so, please specify.
7. Should the Finder be prohibited from engaging in general solicitation as proposed? Would this create practical problems for a Finder? For example, would a Finder be able to establish a pre-existing substantive relationship with investors in order to not engage in general solicitation? 
8. Should we limit the proposed exemption to offerings of a specific size threshold? If so, how should we define such threshold?
9. Have we appropriately limited the number of offerings a Tier I Finder can participate in on an annual basis?
10. Is the limitation that Tier I Finders do not have any contact with potential investors about the issuer workable? Should we instead permit Tier I Finders to have some contact with potential investors?
11. Should we define “capital raising transaction” for purposes of Tier 1? If so, how?
12. Have we appropriately defined the conditions that should apply to the proposed exemption for each tier of Finder? Is more clarity, specificity or flexibility required with respect to the proposed conditions? Are there other or different conditions that should apply to the proposed exemption?
13. Should Finders be able to “find” or solicit investors only for exempt offerings, as proposed? Should Finders be able to “find” or solicit investors only for offerings under certain exemptions from registration? If so, which ones?
14. Should Finders be able to “find” or solicit for all non-Exchange Act reporting companies or should they be able to solicit for a narrower or wider range of companies?
15. Should Finders only be able to “find” or solicit for primary offerings? Should we expand the scope of the proposed exemption to secondary offerings, such as transactions facilitating the sale of equity by employees holding options or warrants?
16. Should the proposed exemption include limitations on the types of securities for which a Finder can “find” or solicit investors?
17. Is more clarity or specificity required with respect to the specific written disclosures that are a condition of the proposed exemption for Tier II Finders? Should we provide more guidance about any of the specific written disclosures?
18. Are there any specific written disclosures to investors that should be required, beyond those that are a condition of the proposed exemption for Tier II Finders? Should the disclosures be required to be written or should the Finder be permitted to provide them orally? Should the written disclosures be required at all?
19. Should we adopt comparable disclosure requirements with disclosures required under the proposed changes to Rule 206(4)-3 under the Advisers Act 
for solicitations of investors in private funds, if adopted? Should the disclosures required by Tier II Finders be deemed to satisfy the disclosure requirements under the proposed changes to Rule 206(4)-3 under the Advisers Act 
for solicitations of investors in private funds, if adopted?
20. Should Tier II Finders be required to receive an acknowledgment of receipt of the required disclosure from the investor? If so, are there methods other than an acknowledgment, for example, a read receipt for email, that could serve to validate that investors received the required disclosure?
21. Should Tier I Finders be subject to a disclosure and acknowledgment requirement?Start Printed Page 64551
22. Should Tier II Finders be required to enter into a written agreement with the issuer where the issuer, without affecting the Finder's obligations, also assumes liability with respect to investors for the Finder's misstatements in the course of his or her engagement by the issuer?
23. Should the proposed exemption be conditioned on a Finder filing a notice with the Commission of reliance on the exemption from registration? Why or why not? If so, when should Finders be required to file the notice? What, if any, disclosures should be required in the notice?
24. Should there be any limitations on the amount of fee a Finder can receive?
25. Should we impose limitations on the form of compensation Finders can receive? Should Finders be prohibited in certain circumstances from receiving transaction-based compensation, and instead be required to receive compensation that is not tied to the success of the transaction (that is a fixed fee or other arrangement)? If so, under what circumstances and how should Finders then be compensated?
26. Should a Finder be able to receive a financial interest in an issuer as compensation for its services? Why or why not?
27. Are the explicit limitations on the activities in which Finders can or cannot engage appropriate for each tier of Finder? What other activities should be expressly permitted or prohibited for each class of Finder?
28. Should we provide guidance on how a Finder can establish that he or she did not know and, in the exercise of reasonable care, could not have known, that the issuer had failed to comply with the conditions of an exemption?
29. Should we provide further guidance on the solicitation-related activities in which Tier II Finders can engage on behalf of an issuer, for example, guidance surrounding a Tier II Finder's discussion of issuer information and arrangement and participation in meetings with issuers and investors?
30. Should we provide guidance regarding activities of private fund advisers, M&A Brokers as defined in the M&A Broker Letter,
or real estate brokers that may require registration under Section 15(a) of the Exchange Act? Should we consider codifying the M&A Broker Letter? 
31. Are there other areas in which the Commission should provide guidance regarding the registration requirements of Section 15(a) of the Exchange Act to other types of limited-purpose broker-dealers?
32. If the proposed exemption is adopted, which staff letters, if any, should or should not be withdrawn, and why?
33. Have we appropriately defined the disqualification condition for Finders?
34. Have we appropriately limited the proposed exemption to individuals who are not associated persons of a broker-dealer?
35. Should the proposed exemption include a limitation such that it would not be available to individuals who were associated persons of a broker-dealer within the previous 12 months?
36. Should the proposed exemption be limited to individuals who are not associated persons of a municipal advisor or investment adviser representatives of an investment adviser?
37. Should the proposed exemption be limited to individuals who are not associated persons of an issuer? Why or why not?
38. Would the proposed exemption provide sufficient investor protections while promoting capital formation for small businesses?
39. Would the proposed exemption have a competitive impact on registered brokers?
40. With respect to the activities permitted for Tier I Finders, what are the practical implications of the requirements if they were subject to broker registration? What about for Tier II Finders?
41. Should we instead take an alternative approach for either class of Finders?
42. Are there areas related to the proposed Finders framework for which the Commission should provide guidance?
43. Should we coordinate with other regulators to provide clarity and consistency on what types of activities Finders and other limited purpose brokers may engage in?
44. Are there any other sources of data or information that could assist the Commission in analyzing the consequences of the proposed exemption? We request that commenters provide any relevant data or information.
45. Other than the possible obligation of a Finder to register as a broker-dealer, the proposed exemption is not intended to affect the rights of the Commission or any other party to enforce compliance with applicable law, or the available remedies for violations of the law. This includes, in the case of the Commission, the ability to impose a broker-dealer registration bar on a person for misconduct that would warrant a bar. Are there any other considerations in this regard that the Commission should take into account as it considers the exemptive relief?
End Supplemental Information
By the Commission.
Dated: October 7, 2020.
Vanessa A. Countryman,
[FR Doc. 2020-22565 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P