Broker-dealer is a term used to describe an individual or company that buys and sells securities for the account of others (brokers) or for their own account (dealers). Section 15(a) of the Securities Exchange Act of 1934 requires individuals and entities that act either brokers or dealers to register with the SEC as broker-dealers.
Startups that pay "finders fees" to unregistered broker-dealers in exchange for assistance in raising money from investors can get into trouble with broker-dealer regulations.
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Startup Fundraising And The Pitfalls Of Paying Finders Fees
While using “finders fees” to help raise investment for startups seems innocent enough, it’s actually a securities regulatory minefield that should either be avoided altogether or navigated with extreme caution.
