ABA Task Force Tries Again On "Finder" Issue

Article by Lee Liebolt

For several years, a task force within the Business Law Section of the American Bar Association has tried to get the attention of federal and state regulators to address an issue that comes up from time to time in private placements and even in an occasional public offering.  What do you do about a person who is instrumental in putting together a deal (or at least in introducing the parties) and who expects to receive some form of transaction-based compensation (i.e., "success fee") but who is not registered as a broker or dealer with the Securities and Exchange Commission or any of the state authorities?  Although admittedly a gray area of the law, it gives securities lawyers pause when having to opine on the validity of an offering because the consequences for such a failure could possibly include a voiding of the transaction.