Legal Memorandum: Compensation for a Non-registered Broker

Issue: When is it permissible for a non-registered broker to receive compensation for his or her role in the sale of registered securities?

Area of Law: Corporate & Securities
Keywords: Non-registered broker; Compensation; Sale of securities
Jurisdiction: Federal
Cited Cases: None
Cited Statutes: None
Date: 11/01/2007

The SEC has provided a number of applicants with responses to Requests for No-Action letters in situations of this type.  The cases where the applicants received a positive response from the SEC (that is, an indication that no action would be taken) were notably consistent.

·         In John M. McGivney Secs. Inc., SEC No-Action Letter (May 20, 1985), the applicant sought permission to pay a finders’ fee based on a percentage of the transaction’s value.  The fee was paid solely for the bringing together a “client” and a “service.”


·         In Financial Charters & Acquisitions, Inc., SEC No-Action Letter (October 24, 1984), a broker-dealer sought permission to provide a finders’ fee to two California consultants in the savings and loan industry who made introductions for him within the industry.  The broker-dealer was to make all presentations, and neither consultant would represent any parties in subsequent negotiations.  The fee would be paid only if the contact introduced to the broker-dealer signed a contract.  The fee would be based on the total contract value. 

·         In Cole, Ayer, McCulley & Light, Inc., SEC No-Action Letter (Mar. 22, 1978), the SEC acceded to the request of a registered investment advisor to continue to pay a commission to a former employee for business he had generated despite the fact that he was no longer a registered advisor. 

·         In Mona/Kauai Corp., SEC No-Action Letter (August 25, 1984), the corporation sought an exemption from registration as […]

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