Private Equity, private deals, and rewards

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Jan 17, 2008 8:48 pm

Hi:
What regulations guide a registered rep when someone says, "If you can find anyone who is a non client of you or your firm, that will fund a great new business venture for private investors to the tune of $1,000,000 then you can get a 1% finders fee?

Specifically, I found a person who is not part of my firm, nor a client, that I can introduce to the party looking for funding. in return, what rule(s) of the SEC or SRO's would make the receipt of such a "finders fee" illegal or unethical? It all just happens in the course of a day when I attend various networking groups.

RR Guy

Jan 18, 2008 9:07 am

The regulations that prohibit 'selling away' from your broker/dealer.  These were a big part of your licensing exams.

If a transaction (or introduction) can be construed as the sale of a security, it must be reported through and monitored by your broker/dealer.  It is best to err on the side of caution with this as the penalties can be pretty severe.

Jan 18, 2008 10:10 am

Change the facts for a second.  "If you can find anyone who likes pizza, send them to my restaurant and I'll pay you $10."


You still won't be able to do it without ammending your U-4 to include this business activity and getting PRIOR PERMISSION from your broker dealer.


In short, you can't earn money without getting prior permission from your broker/dealer.