Nov. 10, 2020
November 11, 2020 Ms. Vanessa Countryman Secretary U.S. Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Re: Notice of Proposed Exemptive Order Granting Conditional Exemption from the Broker Registration Requirements of Section 15(a) of the Securities Exchange Act of 1934 for Certain Activities of Finders Dear Ms. Countryman: Whitemarsh Capital Advisors LLC is writing today to express our opposition to the proposed exemption order for "Finders" issued by the Securities and Exchange Commission (SEC) on October 7, 2020. We believe the proposed order radically reduces investor protections currently afforded customers by regulated persons and entities by creating and sanctioning a loophole that will generate an unregistered class of individuals permitted to solicit unsuspecting retail investors on complicated investment banking deals. We further believe there is a lack of sufficient and conclusive analysis to support this proposed order. The risk of fraud for Main Street retail investors is so overwhelming the Securities and Exchange Commission must withdraw the proposed exemptive order and study the unintended consequences that the proposed exemptive order will bring. Permitting an unregistered person to act as a broker-dealer will seriously undermine the financial marketplace's integrity. For years, the security regulators (SEC, FINRA, and State Securities Regulators) have been diligently attempting to ensure the financial markets' honesty and integrity and have done an excellent job on this mission; this one act will destroy years of your work. Securities regulators (both Federal and State) lack the resources to supervise these individuals' activities adequately. Registered broker-dealers must perform mandatory due diligence on the entities whose securities that such a broker-dealer offers to the investing public. Unregistered finders are under no such requirement, thus denying the investing public the meaningful protection that the due diligence process provides. For years, the Securities and Exchange Commission, along with FINRA and State Regulators, have strived to root out "Bad Actors." Enacting this proposed Exemptive Order, the Commission will be opening the 'floodgate" to those same Bad Actors and new Bad Actors. Unregistered "Finders" (Type I and Type II) will not be subject to SEC Rule 34-86032 Form CRS Relationship Summary. Unregistered Finders will not be required, as regulated persons and entities are, to disclose deal fees, costs, any conflicts of interest that exist, whether or not they have any legal or disciplinary history (they may actually be individuals who have been kicked out of the industry). It will be impossible for Regulators to hold such "finders" to the same standard of conduct that regulated persons and firms must meet when we are providing products or services to our customers. Unregistered "Finders" (Type I and Type II) will not be subject to SEC Rule 34-86031 Regulation Best Interest. As unregistered individuals, they will have no duty of care, no obligation to mitigate or resolve conflicts of interest, no disclosure obligations, and no regulatory compliance obligations. Unregistered Finders will not be required to know their customer, consider alternative investments, disclose fees and costs included in the investment, or follow any of the other regulatory rule protections in place in the regulated market. Retail customers, including our vulnerable seniors, will be completely exposed to potentially unscrupulous issuers and Finders who will be soliciting them for their hard-earned investing dollars. Opening the financial marketplace to these unregistered individuals will permit massive money laundering to take place. If the Commission enacts this proposed exemptive order, it will cripple all of the various law enforcement agencies' efforts in stopping money laundering. These unregistered persons are under no obligation to install the requisite anti-money laundering safeguards and procedures that the SEC and FINRA demand from registered broker-dealers. The SEC Notice stated that few broker-dealers are willing to raise capital for small issuers or small transactions. That is absolutely not true. What might be true is that none of the large Wall Street firms are particularly interested in $5M and under capital raises. For small and midsized firms across the country, that statement is wholly inaccurate and false. Fees from such small transactions are an essential part of small and medium-size broker-dealer revenue streams. In our opinion, the proposed order would weaken investor protections and create a massive loophole for individuals who should be required to register, and those individuals barred from the securities industry to sneak back into the securities business. Under this proposal, Finders would be exempt from basic sales practice rules, and they would not be required to register with the SEC or FINRA. Further, they would not be subject to regulatory inspections or examinations or maintain records of their activities – this would be the Wild, Wild West, all over again and will undo the years of hard work the Securities and Exchange Commission, FINRA, and the State Securities Regulators have put into cleaning up the markets. Thank you for your time and consideration of our comments. Sincerely, Whitemarsh Capital Advisors LLC ------------------------------------------------------------------------------------------------------------------------ Granville A. Ungerleider Managing Member Whitemarsh Capital Advisors LLC