This document discusses the legal issues surrounding finders and finder fees in securities transactions. It notes that finders who engage in activities like capital raising, solicitation, or M&A work may be considered unlicensed broker-dealers by the SEC. Most states prohibit finder fees and the activities of unregistered finders. There are a few exceptions, such as occasional introductions without contingent fees or working through a registered broker-dealer. The document encourages working with licensed professionals and consulting an attorney.

1. ARE YOU A FINDER OR A COMPANY WORKING WITH A FINDER?
BEWARE OF FEDERAL AND STATE SECURITIES LAWS!
This is NOT legal advice and should not be construed as such. Nor is this an attempt to diminish the role of finders
in capital markets. It is a discussion of the current legal and regulatory landscape regarding finders. If you are
acting as a finder or looking to use a finder to raise capital or in an M&A transaction, consult a securities attorney in
your state for definitive legal advice.
A finder is typically defined as quot;an intermediary who contracts to find, introduce and bring together parties to a
business opportunityquot;. Other titles exist to describe these individuals, including, intermediaries, private placement
brokers, merchant bankers, financial public relations advisors, business consultants and sometimes as investment
bankers. No matter by which name, unless they are registered, SEC defines them as quot;UNLICENSED BROKER
DEALERSquot;. There is an important legal distinction between securities broker-dealers and finders. quot;Securities
brokers are required to register with the SEC pursuant to Section 15 of the Securities and Exchange Act of 1934
(15 U.S.C. 78(a)(4)), which broadly defines any person engaged in the business of effecting transactions in
securities for the account of others to be within the scope of the registration mandate.quot;
In most STATES the use of a finder and the payment of a finders fee (subject to very narrow exceptions) is
ILLEGAL and will likely cause a company, its officers, directors and agents to be subject to criminal sanctions and
civil liability (on a personal and company level). THE COMPANY MAY HAVE TO RETURN THE FUNDS RAISED
BY A FINDER. This is true, even if the potential investors are High Net Worth individuals, or Qualified Institutional
Investors. The same applies at the FEDERAL level, subject to SEC actions. Advertising, cold calling and even
posting in public forums are considered SOLICITATION, which are definite NO-NOs.
In addition to capital raising activities, which are considered illegal, there have been several legal cases where an
intermediary has been deemed a quot;finderquot; in an M&A transaction and therefore subject to disciplinary SEC action.
EXCEPTION (1): The SEC has recognized that a person who only OCCASIONALLY makes mere
introductions of potential investors to issuers, either for free or under a non-contingent fee arrangement,
and not more, is a finder who does not need to register as a broker.
EXCEPTION (2): some states have proposed rules that would establish an “introduce and walk away”
framework for registered finders. (See some of the links below.)
EXCEPTION (3): Provided that it is NOT in the ordinary course of business, a broker/dealer IS ALLOWED
to pay a fee to a finder for introducing an issuer (i.e. company) or an investor to the broker/dealer, as long
as the finder operates under the quot;introduce and walk awayquot; framework.
Here are some relevant links. Better safe than sorry.
www.duanemorris.com/alerts/alert2872.html www.wsgr.com/PDFSearch/2273069.pdf
www.hg.org/articles/article_1603.html http://activecapital.org/story?story_id=20094
www.innovationspublishing.com/georgia/loadarticle.asp?id=347
If you, outside your ordinary course of business, have come across a company that needs to raise capital or needs
M&A advice, why not partner with an investment bank who is a registered broker/dealer, let them do the work and
collect a fee at the end? If you have such a relationship at the CEO or CFO level, with a privately-held or a publicly
traded company, with $20-400 million in revenues, preferably profitable, looking to raise equity, debt, acquire a
company or be sold, let's talk and see if we can work together.
Volfi Mizrahi
Managing Director
Bryant Park Capital
vmizrahi@bryantparkcapital.com
www.bryantparkcapital.com
May 2009 Page 1 of 1