Saturday, August 29, 2015

SEC Approves FINRA Rule 2040- Payments to Unregistered Persons

(Source: FINRA) Effective August 24, 2015, the SEC approved FINRA's rule change relating to payments of unregistered persons in regulatory notice 15-07. FINRA rule 2040 aligns with the Securities Exchange Act of 1934. FINRA Rule 2040(c) relates to Nonregistered foreign finders which can be found in the typical EB-5 offering. A broker-dealer who sells EB-5 securities must disclose their fees to the EB-5 investors. The EB-5 investors must provide written acknowledgement to the dealer-broker to show they are aware of the compensation agreement. Records disclosing total compensation paid by the issuer to the finder and all investors written acknowledgements must be recorded and available for inspection by FINRA.

If all the conditions set forth in Rule 2040(c) are satisfied, member firms can pay ongoing transaction-related compensation to non-registered foreign finders based on the business of non-U.S. customers that finders refer to member firms, and all accounts referred by such foreign finders would be carried on the books of the member firm.

To learn what impacts will be made to the EB-5 program, consult with us today.

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