November 7, 2020
I would like to start by first thanking the SEC for setting direction on Finders Fees. As a new small issuer that is trying to raise funds under Regulation D, we have found it extremely difficult to navigate the current regulations. Small businesses do not have the resources and financial means to hire large brokers to help us raise funds. The current broker registration requirements have made it practically impossible to get assistance from others and properly compensate them. We welcome the new Tier 1 and Tier 2 Finder Safe Harbors.
Below are some of the thoughts/feedback with respect to the proposed order:
1) The Tier 2 definition should include some level of entities. With the current definition, we would still not be able to work with an individual as a Tier 2 finder if they have organized themselves as an LLC. Given the written disclosure requirements for a Tier 2 finder, there should be some flexibility for entities to be a Tier 2 finder. I would recommend the SEC also consider breaking out entities as a separate category from crowdfunding platforms.
2) With respect to general solicitation, a Tier 2 finder should be able to do some general solicitation and determine if a potential investor is an accredited investor. As a small business who would likely use a Tier 2 finder and potentially need their assistance do targeted advertising online and through social media platforms, we believe that no ability to do any type of general solicitation may limit the effectiveness of a Tier 2 finder. Since a written disclosure is required to be provided to investors by Tier 2 finders, we believe they should be permitted to do some general solicitation.
3) We believe its important that all small business exempt offerings are included. This includes 506(b), 506(c), 504, and Regulation A offerings.
4) We believe that there should be flexibility that either the Tier 2 Finder or the Issuer can provide the written disclosure to the investor prior to receiving their capital.
5) We believe that there should be flexibility to provide the investor disclosure over email or other electronic means (online form acceptance, Docusign, etc).
6) There should be no limits on what fee a Finder can receive. Every small business is different and their business models are different. A small business should have the flexibility to determine what it can afford to pay a Finder for their services to help them raise capital. Small business and Finders should be free to negotiate what they will be paid for their services. As long as the disclosure to the investor clearly articulates what is being paid to the Finder, that should be sufficient to ensure that the investor is protected.
We would like to thank you again for helping put regulations in place that can accelerate small business growth and looking forward to seeing the final guidelines.