Private Capital Insight / Intermediaries
Can You Pay Someone a Percentage of the Capital They Raise?
Businesses frequently discover the finder issue only after agreeing to pay someone a percentage of the capital raised.
That is the wrong time to analyze it.
An offering's exemption from securities registration does not automatically exempt the people soliciting investors from broker-dealer requirements. The person's activities, compensation, registration status and applicable federal and state law should be considered before investor outreach begins.
Before the introduction
Questions to Address Before Hiring a Finder
01 What will the person actually do?
02 Will compensation depend on whether investments close?
03 Will the person solicit investors?
04 Recommend the investment?
05 Negotiate terms?
06 Participate repeatedly in securities transactions?
07 Handle investor funds?
08 Is the person or firm appropriately registered?
A role worth defining
Compensation can change the legal analysis.
A percentage-based fee may be one fact among many, but it can matter alongside solicitation, recommendations, negotiation, repeated transaction activity, custody and registration. Review the proposed arrangement before outreach begins, while the role and communications can still be shaped deliberately.
Intermediary review
Address the arrangement before the first conversation.
A considered first step
START WITH THE RIGHT ASSESSMENT
Before legal work begins, identify the transaction, urgency, complexity, decision authority, and principal readiness issues.
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