October 19, 2020
We don't think that the definition of Finder should be limited to natural persons. The challenge that small businesses, and particularly small businesses owned by historically marginalized populations (e.g. people of color, women, veterans) is that their capital raises are smaller and their ability to pay commissions is also relatively small. Therefore, it is often difficult for a "natural person" to develop a sustainable business model where their primary source of income is raising capital for smaller businesses. On the other hand, if small organizations are allowed to be defined as Finders it will allow for the firm to raise capital on behalf of the issuer and is more likely to lend itself to a more sustainable model to support smaller businesses that leverages a broader network, and allows for the natural person to not be reliant on finder fees for their primary source of income (which often deters individuals from helping smaller businesses). We therefore think that small organizations should be allowed to be defined as Finders. All other proposed disclosure requirements should apply to the organization, and any employees at the organization that engage in activities as a Finder for an issuer should be required to comply with all required disclosure as a Tier 1 or Tier 2 Finder with the one distinction being that the disclosure will indicate that the organization (rather than the individual / natural person) is incentivized to receive compensation for acting as a Finder.
We also believe that a cap on the Finder fee should be considered to ensure that smaller businesses are paying transactional fees consistent with market rates for similar transactions. Our recommendation would be for the cap on Finder fees to be informed by the "market" rate for capital raises charged by larger broker-dealers.