Published on Oct 8th, 2020 |

On October 7th, the SEC released a public statement stating that the Commission has proposed to create a new exemption that will permit individuals to engage in traditional brokerage activity without the important investor protections that come with registration as a broker-dealer. This is essentially creating a new category of unregistered financial professionals.

The expectations are to do this through exemptive relief, avoiding any important economic analysis that should accompany a proposed policy shift of this significance. The Commissions main goal for this was to propose to permit unregistered activity that meets the traditional definition of brokerage without adding basic protections.

What are the key facts from this SEC Release?

  • The Commission is proposing to grant a conditional exemption from the broker registration requirements
  • This conditional exemption is meant to permit natural persons to engage in certain limited capital raising activities involving accredited investors
  • Two classes are created from this proposed exemption (Tier I and Tier II Finders)
    • Tier 1 Finders are limited to providing contact information of potential investors and they cannot have any contact with a potential investor about the issuer
    • Tier 2 Finders can solicit investors on behalf of the issuer, but there are solicitation-related activities that are limited to distributing issuer offering materials to investors, discussing issuer information included in any offering materials, and much more

Want to learn more detail regarding the conditions for both Tier I and Tier II Finders?

Click HERE to see the full release!


The Vigilant Team is always happy to schedule a time to chat, feel free to contact us with any questions!