November 26, 2020

Volume X, Number 331

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November 25, 2020

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November 24, 2020

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SEC's Proposed Exemptive Order For Finders Overlooks California Exemption

Yesterday's big news at the Securities and Exchange Commission was a proposed exemptive order for finders.  The question of whether issuers can compensate anyone other than a registered broker for finding investors has bedeviled attorneys and their clients for decades.  Therefore, the SEC's move to establish some clarity to this murky question is a welcomed development.

I was surprised, however, that the SEC's proposed order made no mention of existing state-law exemptions for finders.  California, for example, enacted legislation in 2015 that created an exemption for finders. Cal. Corp. Code § 25206.1 Like the SEC's proposed exemption, California's exemption is limited to natural persons and is subject to a number of conditions. The conditions to California's exemption, however, are much more onerous and limiting.  While I do not propose that the SEC adopt California's exemption, I find it strange that the SEC does not even mention existing state law exemptions.  

The SEC is not proposing to preempt state broker-dealer registration requirements.  The SEC notes in a footnote the following: "Nothing in the proposed exemption excuses compliance with all other applicable laws, including the antifraud provisions of the Securities Act and the Exchange Act and state law."  Therefore, California finders will need to continue to comply with the more demanding conditions of Section 25206.1 even as they gain relief at the federal level.axa

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 282
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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