Draft for 5.10.2017 Discussion

SECURITIES AND EXCHANGE COMMISSION

ADVISORY COMMITTEE ON 

SMALL AND EMERGING COMPANIES

Washington, DC 20549-3628

 May __, 2017

The Honorable Jay Clayton

Chairman

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549-1070

Dear Chairman Clayton:

As you know, the Securities and Exchange Commission organized the Advisory Committee on 

Small and Emerging Companies to provide the Commission with advice on the Commission’s 

rules, regulations, and policies with regard to its mission of protecting investors, maintaining 

fair, orderly, and efficient markets, and facilitating capital formation, as they relate to the 

following: 

(1) capital raising by emerging privately held small businesses and publicly traded 

companies with less than $250 million in public market capitalization;

(2) trading in the securities of such businesses and companies; and 

(3) public reporting and corporate governance requirements to which such businesses 

and companies are subject.

On behalf of the Advisory Committee, we are pleased to submit the enclosed recommendation

regarding the regulation of finders and other intermediaries in small business capital formation 

transactions. This topic has been discussed at multiple Advisory Committee meetings, most 

recently on October 5, 2016 and February 15, 2017, and the recommendation was approved by 

the members of the Advisory Committee present and voting at a meeting held May 10, 2017. 

We and the other members of the Advisory Committee are prepared to provide any additional 

assistance that the Commission or its staff may request with respect to these recommendations.

Respectfully submitted on behalf of the Advisory Committee,

Stephen M. Graham Sara Hanks

Committee Co-Chair Committee Co-Chair
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Members of the Advisory Committee

Robert Aguilar

Xavier Gutierrez*

Brian Hahn

Jenny Kassan

Catherine V. Mott

Jonathan Nelson

Patrick Reardon

Lisa Shimkat

Annemarie Tierney

Gregory C. Yadley*

Laura Yamanaka

Non-voting members

Michael Pieciak

Michele Schimpp

* These members plus Co-Chair Stephen Graham were not present at the meeting held on 

February 15, 2017.

** These members were not present for the Advisory Committee discussion and vote held on 

May 10, 2017. 

Enclosure

cc: Commissioner Michael S. Piwowar 

Commissioner Kara M. Stein

Heather Seidel

Joanne Rutkowski

Shelley E. Parratt 

Elizabeth Murphy

Sebastian Gomez Abero

Julie Z. Davis
Draft for 5.10.2017 Discussion

U.S. Securities and Exchange Commission 

Advisory Committee on Small and Emerging Companies 

Recommendation Regarding Finders and Investment Platforms 

Not Registered as Broker-Dealers

AFTER CONSIDERING THAT: 

1) Identifying potential investors is one of the most difficult challenges for small businesses 

trying to raise capital.

2) There is significant uncertainty in the marketplace about what activities require brokerdealer registration. Companies that want to play by the rules struggle to know in what 

circumstances they can engage a “finder” or platform that is not registered as a brokerdealer.

3) For years, many interested parties have urged the Commission and its staff to take steps 

to address this ambiguity. As one recent example, in 2015, this Committee recommended

that the Commission “take immediate intermediary steps to begin to address issues 

regarding the regulation of intermediaries in small business capital formation 

transactions....” 

4) The Committee is disappointed the Commission has not taken actions to help to address 

these concerns despite repeated and longstanding requests. 

THE COMMITTEE RECOMMENDS THAT:

The Commission take action in the near future to provide certainty in the context of finders and 

platforms involved in primary and secondary securities transactions. The range of potential 

options includes compliance or enforcement efforts, rulemaking, or coordination with the states. 

Even staff guidance such as Q&A’s as to what constitutes broker-dealer activity would be 

tremendously helpful.