|(a) Prohibited activities. A finder shall not:
(1) participate in negotiating any of the terms of
(2) give advice to an accredited investor or an issuer
regarding the advantages or disadvantages of entering into an investment;
(3) conduct due diligence on behalf of a potential
issuer or potential investor, provide valuation, or provide other
analysis to an accredited investor or an issuer regarding an investment;
(4) advertise to seek accredited investors or issuers;
(5) have custody of an accredited investor's funds
(6) serve as an escrow agent for the parties; or
(7) disclose information to an accredited investor
or to an issuer other than the information described in subsections
(b) and (c) of this section.
(b) Required disclosures.
(1) A finder must disclose the following to each accredited
(A) that compensation will be paid to the finder;
(B) that the finder can neither recommend nor advise
the accredited investor with respect to the offering; and
(C) any potential conflict of interest in connection
with the finder's activities.
(2) The disclosures required by paragraph (1) of this
subsection must be provided in writing.
(c) Permitted disclosures.
(1) A finder may provide to an accredited investor
some or all of the following information:
(A) the name, address, and telephone number of the
issuer of the securities;
(B) the name, a brief description, and price (if known)
of any security to be issued;
(C) a brief description of the business of the issuer
in 25 words or less;
(D) the type, number, and aggregate amount of securities
being offered; and/or
(E) the name, address, and telephone number of the
person to contact for additional information.
(2) A finder may provide to an issuer contact information
regarding an accredited investor.
(1) A finder is not required to maintain the records
listed in §115.5 of this title (relating to Minimum Records);
however, compliance with the recordkeeping requirements of §115.5
of this title will satisfy the requirements of this subsection.
(2) A finder shall maintain and preserve a copy of
the Form BD and the Form U-4 used to register the finder, and any
amendments thereto, for a period of five (5) years from the date of
the termination of the finder's registration.
(3) A finder shall maintain and preserve for a period
of five (5) years the following records related to transactions that
are completed and to transactions where the finder receives compensation:
(A) records of compensation received for acting as
a finder, including the name of the payor, the date of payment, name
of the issuer, and name of the accredited investor;
(B) copies of information provided by the finder to
prospective accredited investors;
(C) any agreements and/or contracts between the finder
and the accredited investor;
(D) any agreements and/or contracts between the finder
and the issuer;
(E) any lists of contacts/prospective accredited investors
and/or issuers; and
(F) any correspondence with accredited investors and/or
(4) The records required to be maintained and preserved
pursuant to this subsection must be maintained in a manner that will
permit the immediate location of any particular document.
(5) The records required to be maintained and preserved
pursuant to this subsection may be archived if they are more than
two years old.
(6) A finder shall not commingle records to be maintained
and preserved pursuant to this subsection with other records.
(7) A finder shall, upon written request of the Securities
Commissioner, furnish to the Securities Commissioner any records required
to be maintained and preserved under this subsection.
(e) Supervisory requirements. Because a finder is an
individual who will not have agents, a finder is not required to maintain
a supervisory system as provided in §115.10 of this title (relating
to Supervisory Requirements).
(1) Application. In lieu of the application requirements
listed in §115.2 of this title (relating to Application Requirements),
a complete application for a finder consists of the following and
must be filed in paper form with the Securities Commissioner:
(A) Form BD, including all applicable Disclosure Reporting
Pages. For any question that does not pertain to the finder's business,
the finder must indicate that the question is not applicable. To identify
the finder's activities, the finder must mark Form BD, Item 12.Z,
that refers to "Other," and describe such activities on Form BD, Schedule
D, Section II. A finder is not required to complete certain schedules
of the Form BD unless requested to do so by the Securities Commissioner.
Such schedules include Schedule A, B, C, and E, and Schedule D, Sections
IV, V and VI.
(B) Form U-4, with the following items completed:
(i) Item 1 (General Information) limited to completion
(I) first, middle, last name; and
(II) individual social security number.
(ii) Item 3 (Registration With Unaffiliated Firms);
(iii) Item 6 (Registration Requests With Affiliated
(iv) Item 9 (Identifying Information/Name Change);
(v) Item 10 (Other Names);
(vi) Item 11 (Residential History);
(vii) Item 12 (Employment History);
(viii) Item 13 (Other Business);
(ix) Item 14 (Disclosure Questions and related Disclosure
Reporting Pages if applicable);
(x) Item 15 (Signatures);
(xi) Item 15A (Individual/Applicant's Acknowledgement
and Consent); and
(xii) Item 15D (Amendment Individual/Applicant's Acknowledgement
(C) any other information deemed necessary by the Securities
Commissioner to determine a finder's financial responsibility or a
finder's business repute or qualifications; and
(D) the appropriate registration fee(s).
(2) Post-reporting requirements. A finder is subject
to the dealer and agent requirements contained in §115.9 of this
title (relating to Post-Registration Reporting Requirements).