Securities Regulation Daily Wrap Up, CORPORATE FINANCE—Commissioners lend perspective on Reg A and ‘finders’ issues before advisory committee meeting, (Jul 23, 2025)

By Rebecca E. Hoffman, J.D.

They urged the committee to revisit the 2020 proposed exemption order, either to improve upon it or to throw it out and start over.

SEC Chairman Paul S. Atkins, former acting chairman Mark T. Uyeda, and Commissioners Caroline A. Crenshaw and Hester M. Peirce spoke at the SEC’s Small Business Capital Formation Advisory Committee meeting July 22, as the committee prepared to follow up its discussion on Regulation A from its last meeting, and tackle the topic of “finders,” who act on behalf of issuers to raise capital.

Reg A. “[T]he Commission should consider regulation as a continuum, where regulatory burdens increase relative to the impact of the offerings,” Uyeda said, noting that the current Reg A environment is unfavorable to the secondary market. “This framework creates a ‘Hotel California’ situation where a person can invest capital in a company any time but never exit.” He suggests improving the Reg A framework to the benefit of all participants.

Finders. Atkins noted that finders “fill an essential void in the entrepreneurial ecosystem by identifying, and in certain circumstances soliciting, potential investors” for smaller businesses that cannot attract venture capitalists and larger investors. Unfortunately, he said, there is a “legal gray area” when it comes to the circumstances under which finders can operate without registering as a broker-dealer. The uncertainty blocks the development of small businesses, he said, and with it, jobs. The matters to be discussed are important because small businesses “exemplify a spirit of dynamism that has made America a place where a single idea sparked in a garage or a storefront can scale into something extraordinary,” he said.

Peirce observed that friends and colleagues trying to connect investors to fledgling businesses “may find themselves unwittingly acting as broker-dealers and therefore subject to an onerous regulatory framework ill-suited for the connections and introductions these individuals facilitate.” On the other hand, businesses are not clear on when it is permissible to engage a finder that is not registered. Uyeda called for regulation in proper proportion, noting that “a person who merely provides a name and contact information to a company seeking capital in exchange for modest transaction-based compensation does not need to be regulated in the same manner as the largest Wall Street brokerage firms.”

2020 Proposal. The SEC’s proposal would temporarily exempt finders from broker registration if they meet certain conditions, such as working only with accredited investors and avoiding general solicitation. Peirce encouraged the committee to consider whether the proposal would be a good starting point for an exemption or whether a different approach is needed, whether a full rulemaking process should be applied, whether a blanket exemption for offerings under a certain size is still a desirable option, and whether an exemption should cover secondary activities.

Crenshaw was not in favor of the proposal because it would allow finders to engage in “traditional broker activity” without “effective guardrails” to protect investors from noncompliance and scams. She also noted that the full rulemaking process would allow for “nuanced” policymaking. Further, “the data we look at as part of any rulemaking should reflect the difference between mere capital raising and actual capital formation,” she said.

Atkins concluded his remarks by saying, “Our task, as well as our responsibility, is to ensure that the agency’s regulatory framework keeps pace with [small businesses’] ambition.”

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