SEC Authorizes FINRA Guideline Change to Topic Capital Acquisition Brokers to Pay-to-Play Rules

On September 29, the Securities and Exchange Commission authorized the guideline proposal of the Financial Industry Regulatory Authority to subject capital acquisition brokers (CABs) to the exact same pay-to-play constraints currently appropriate to non-CAB member companies. As discussed in more information in this advisory, CABs are FINRA members that are participated in a minimal series of broker-dealer activities, such as encouraging companies on capital raising and business restructuring or serving as a personal positioning representative to institutional financiers (topic to conditions). Taxis choose to be dealt with as such and undergo a different set of structured FINRA guidelines.

The SEC’s pay-to-play guidelines forbid a financial investment consultant and its covered partners from supplying or accepting supply payment to anyone to obtain a federal government entity for financial investment advisory services on behalf of the financial investment consultant unless the person is a “managed person.” The SEC specifies a “controlled person” to consist of a FINRA member company topic to a FINRA pay-to-play guideline. FINRA’s brand-new guideline clarifies that CABs go through FINRA’s pay-to-play guidelines, and CABs, for that reason, make up “managed individuals.” As soon as the guideline works, a financial investment consultant and its covered partners might pay to a CAB to obtain a federal government entity for financial investment advisory services. Pay-to-play recordkeeping requirements will also use to CABs.