suspended from association with a broker-dealer; and
In an SEC open meeting on October 13, 2015, the SEC adopted final rules for a crowdfunding exemption from registration. The new rules:
However, only offerings conducted according to the requirements of Regulation Crowdfunding are eligible for the exemptions provided therein. Intermediaries conducting offerings pursuant to Rule 506 or some other exemption from registration cannot rely on the broker-dealer exemption provided for funding portals in Regulation Crowdfunding.
The general rule under the Texas Securities Act (the “TSA”) is similar to the Exchange Act analysis above. Simply put, the TSA allows an exemption from dealer registration for those acting on behalf of the issuer, but only if they meet four important criteria:
If these criteria are not met, the person offering the securities must be registered with the State Securities Board as a dealer or agent. Any person that is not an owner, director, officer, or employee of the issuer who offers or sells the issuers securities is subject to the dealer registration provisions of the TSA. Any exemptions defined under the TSA are only available to someone who meets the above criteria.
As is perhaps obvious, the rules in Texas are not in harmony with the SEC distinctions between finders and brokers. Consequently, a finder may be exempt from broker registration on the Texas state level, but required to register as a broker on the federal level. Conversely, a finder may not have to register under the SEC’s exemption rules, but may have to register as a broker under Texas law. Ultimately, those who find themselves navigating the often-blurry lines between finders and brokers should discuss with their attorney (or, of course, reach out to us).