The long-standing rules for foreign researchers – when a brokerage firm can pay transaction-based compensation to an unregored foreign discoverer – will be incorporated into the new FINRA 2040 rule effective August 24, 2015. In order to determine whether certain activities lead someone to the definition of a broker, the SEC has uncovered the factors it has taken into consideration in deciding whether a discoverer has violated securities laws by not registering as a broker-dealer. According to the case law and the SEC-No-Action letters, the following facts are typical of researchers who would not have to register as brokers: the additional material (.01) provided for by Rule 2040 requires the company to make a duly supported finding that the proposed activities would not require the recipient of the payments to register as a broker. When payments are in progress, the provision should be reviewed periodically. As a result, companies can verify the adequacy of their current procedures for obtaining, documenting and periodic verification of the necessary assurances through the foreign discoverer and foreign client, as well as mechanisms to ensure that researchers do not conduct activities beyond the original recommendation. As a general rule, the SEC prohibits the payment of commissions or other transaction-based compensation to individuals or corporations that assist in securities transactions, including a capital increase, unless that company is a licensed broker-trader. The SEC considers that the registration of brokers is essential to protect potential purchasers of securities and the market as a whole and actively pursues un conceded activities. The registration process is laborious, including background checks, post-fingerprints. B staff, minimum financial requirements, OAR affiliation and ongoing regulatory and compliance requirements.
However, despite the efforts of the SEC, as indicated in the introduction, an entire metallurgical industry has developed from unlicensed discoverers, which simply overshadows the efforts of regulators. Laura Anthony, a securities lawyer, and her experienced legal team provide ongoing advice to small and medium-sized private companies, OT-issuers and publicly traded companies, as well as private companies that go public on the NASDAQ, NYSE MKT or the off-exchange market, such as OTCQB and OTCQX.