SEC Denies Finder Fee Arrangement

 

 

Limiting the Paul Anka Finder's Fee Exemption

by Peter J.Chepucavage

edited by Bill Singer, http://BrokeAndBroker.com

 

 

Unfortunately, the Securities and Exchange Commission's (SEC) Division of Trading and Markets  (the "Division") once again chose not to clarify its previous positions in the area of permissable payments of finder's fees when it issued a letter to Brumberg, Mackey & Wall, PLC on May 17, 2010 that declined to grant No-Action relief concerning finder's fees. Brumberg, Mackey & Wall, P.L.C. May 17, 2010 http://sec.gov/divisions/marketreg/mr-noaction/2010/brumbergmackey051710.pdf  (the "BM&W Letter"). 

Essentially, BMW represented that the law firm (not securities practitioners) would refer interested clients to an issuer but would not engage in a sales effort. The Division noted that the introduction of only those persons who had an interest in investing implies pre-screening and pre-selling, and gives BMW a "salesman's stake."

In Paul Anka, 31 SEC No-Action Letter (July 24, 1991), the Division granted No-Action relief where a commission-like fee was involved, possibly because of the uniquely limited duties of the finder involved and the one-time occurrence of the event. In Anka, the Ottawa Senators Hockey Club retained entertainer Paul Anka to act as a finder for purchasers of limited partnership units issued by the Senators. Anka agreed to furnish the Senators with the names and telephone numbers of persons in the United States and Canada whom he believed might be interested in purchasing the limited partnership units. Anka would neither personally contact these persons nor make any recommendations to them regarding investments in the Senators.

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http://www.brokeandbroker.com/index.php?a=blog&id=475