Three commissioners called for reform in 48 hours. If you've used an informal introducer to connect with investors, your fundraising risk profile just changed.
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Someone introduced you to your lead investor. Maybe it was a former colleague. Maybe an advisor you're paying a small success fee. Maybe a friend of a friend who happens to know the right people at the right funds.
If that person received any compensation tied to the deal, they may have been acting as an unregistered broker-dealer. Under current SEC rules, that means your entire funding round could be unwound.
This isn't a hypothetical. The SEC has been pursuing StraightPath Venture Partners and its sales agent network since 2022, with the most recent settlements landing in January 2025. Individual agents paid over $2.8 million in disgorgement and penalties. Related enforcement hit PMAC Consulting and VCP Financial for unregistered broker activity. The companies that used those finders? They faced potential rescission of every dollar raised through those introductions.
But something shifted this week.
On February 23 and 24, all three senior SEC commissioners, Chairman Paul Atkins, Commissioner Mark Uyeda, and Commissioner Hester Peirce, publicly called for regulatory reform of the finders framework. Back-to-back speeches. Language that suggests this SEC isn't just studying the problem. They're moving toward a fix.
If you're running a growth-stage company that has ever relied on informal introductions to raise capital, this is the most important SEC development of the year for your business.
What Happened
The February 24 Meeting
The SEC's Small Business Capital Formation Advisory Committee met on February 24, 2026. The agenda was pointed: a continued "deep dive" on finders regulation (building on a discussion that started last July), followed by a new panel on the private secondary market.
Three things made this meeting different.
Commissioner Uyeda called a regulatory solution for finders "long overdue." He went further, arguing that when an intermediary serves in a limited role, "such as simply providing introductory services, the full panoply of broker-dealer regulation would not appear to provide additional investor safeguards." That's a sitting commissioner saying the current rules don't fit the problem they're supposed to solve.
Commissioner Peirce described the current framework as a "muddled web of no-action letters that is out of step with practical realities." She noted that "the absence of a finder's framework does not deter bad actors" while good actors "may unwittingly act as finders" and face enforcement consequences. The rules punish the wrong people.
Chairman Atkins said regulatory uncertainty "compounds barriers by deterring individuals from serving as finders, and companies from engaging them." His staff in the Division of Trading and Markets had emphasized at the July meeting that finding investors "remains one of the most persistent challenges for small businesses."
Three commissioners. One message. The finders framework is broken and we're going to fix it.
The Day Before: Atkins at the US Chamber
Context matters. One day earlier, Chairman Atkins spoke at the U.S. Chamber of Commerce and laid out his broader capital formation agenda. Public listings have dropped roughly 40% since the mid-1990s. He endorsed the INVEST Act, the bipartisan package of 22 bills that passed the House in December 2025 with a 302-123 vote. And he called out the absurdity of the current accredited investor definition: "Why should a finance professor earning $100,000 a year be prohibited from private offerings while those who inherit wealth are presumed better qualified?"
This wasn't a one-off comment. It was a coordinated signal across two days, three commissioners, and two venues.
The 30-Year Problem
To understand why this matters, you need to know what a "finder" is in SEC terms. And why the rules have been broken for decades.
Section 15 of the Securities Exchange Act of 1934 makes it unlawful to effect securities transactions without registering as a broker-dealer. Section 3(a)(4) defines "broker" broadly as anyone "engaged in the business of effecting transactions in securities for the account of others." That definition is wide enough to capture someone who simply introduces a founder to an angel investor and receives a thank-you fee for the connection.
The SEC has never created a formal exemption for finders. What we have instead is a patchwork of no-action letters. The Paul Anka letter from 1991 said a one-time introduction with a success fee was okay. The Brumberg letter from 2010 narrowed that position, suggesting that any transaction-based compensation could trigger registration. Courts rejected the SEC's bright-line approach and applied a multi-factor test instead (SEC v. Kramer, 778 F.Supp.2d 1320, M.D. Fla. 2011). But the practical result is the same: nobody knows exactly where the line is.
In October 2020, the SEC proposed an exemptive order (Exchange Act Release No. 34-90112) that would have created two tiers of finders. Tier I finders could provide investor lists for one issuer, once per year. Tier II finders could solicit investors, distribute materials, and arrange meetings, with disclosure requirements. The proposal passed 3-2. Then nothing happened. The comment period closed, Chairman Clayton left, and the Gensler SEC shelved it.
Six years in a regulatory gray zone. Aggressive enforcement. No safe harbor.
What It Means for Your Business
The Good News
This is the most favorable SEC posture toward finders regulation in the agency's history. Three commissioners calling for reform publicly. The SBCFAC actively developing recommendations. The INVEST Act and Atkins' broader capital formation agenda all pushing in the same direction.
I expect we'll see some form of finders exemption within the next 12 to 18 months. Whether it looks like the 2020 proposal, a revised version, or a full rulemaking, the direction is clear: limited finder activity in private placements will get a regulatory safe harbor.
The Bad News
We're not there yet.
The enforcement/reform disconnect is real. The SEC is simultaneously signaling that the rules will change while continuing to enforce the current ones. StraightPath and PMAC didn't get a pass because reform was coming. They got penalties.
Here's the practical risk: if you closed a round in the last two years using a finder who received transaction-based compensation, that arrangement could still draw SEC scrutiny. Under Section 29(b) of the Exchange Act, contracts made in violation of the broker-dealer registration requirement are voidable. Investors in your round could, in theory, demand their money back.
The likelihood of that happening varies. But it's not zero. Especially if a disgruntled investor or a competitor decides to make noise.
The Counterpoint Worth Noting
Some practitioners argue that the multi-factor test from SEC v. Kramer already provides meaningful protection for limited finder activity. If your finder did nothing more than make an introduction and receive a flat fee (not a percentage), the argument goes, they likely don't meet the statutory definition of a broker.
That may be correct as a legal matter. But it won't stop the SEC from bringing an enforcement action. And defending one costs more than most startups can afford.
The Secondary Market Connection
Commissioner Peirce's remarks flagged something else founders should watch: private secondary volume hit $240 billion in 2025, up 48% from $162 billion in 2024. VC secondaries alone ($61.1 billion) surpassed VC-backed IPOs ($58.8 billion) in the 12 months ending June 2025. More money is changing hands in private secondary markets than through IPOs. That's a structural shift.
Why does this matter for your fundraising? The SBCFAC is now looking at finders and secondary markets together. If the SEC creates a finders exemption, it's likely to also address whether finders can facilitate secondary transactions, not just primary capital raises. That would open a new channel for employee liquidity, early investor exits, and cap table cleanup.
What To Do
These are actions your team can take this week:
1. Audit your finder arrangements (CEO/CFO). Review every round you've closed in the last three years. Identify anyone who received compensation, in any form, for introducing you to investors. Document the arrangement: was it a flat fee or a percentage? Did the finder do anything beyond introductions (attend meetings, distribute materials, negotiate terms)?
2. Classify your finders against the 2020 framework (legal team). Even though the 2020 proposal was never adopted, use its Tier I/Tier II structure as a diagnostic tool. Tier I (list-only, one issuer, one time) is the safest category. Tier II (active solicitation) is where enforcement risk concentrates.
3. Formalize your finder relationships in writing now (CEO). If you're currently using a finder or plan to for your next raise, put the arrangement in a written agreement. Specify that the finder's role is limited to introductions. Include representations that the finder won't provide investment advice, negotiate terms, or handle funds. This doesn't eliminate regulatory risk, but it demonstrates good faith and creates a paper trail that matters if questions come up later.
4. Build a "clean finder" process for future rounds (CFO/legal team). Develop a standard playbook: (a) written scope-of-services agreement, (b) disclosure to investors that a finder is involved and will be compensated, (c) flat-fee compensation rather than a percentage of the raise (percentage-based fees are one of the strongest triggers for broker-dealer classification under the Kramer multi-factor test), and (d) a representation from the finder that they're not providing investment advice.
5. Brief your board on the regulatory shift (CEO). At your next board meeting, flag two things: the near-term risk (existing finder arrangements may need review) and the medium-term opportunity (a finders exemption could expand your investor access for the next round).
6. Track the INVEST Act in the Senate (CEO/CFO). It passed the House 302-123 in December. Key provisions: VC fund cap raised from $10 million to $50 million, investor limits up from 250 to 500, and a new exam-based pathway to accredited investor status. Senate timing is unclear, but if it passes, your investor pool gets significantly wider.
7. Review employee secondary sale policies (CFO/legal team). With the SBCFAC now examining the private secondary market, expect regulatory attention on how private companies manage secondary transactions. If you don't have a policy governing employee stock sales, tender offers, and ROFR provisions, build one before regulators ask why you don't.
What We're Watching
SBCFAC recommendations on finders. The committee is expected to issue formal recommendations. No timeline announced, but the July 2025 and February 2026 meetings suggest they're building toward a concrete proposal.
INVEST Act Senate action. Referred to the Banking Committee. No vote scheduled. If the Senate moves, accredited investor modernization and VC fund cap increases could take effect quickly.
SEC 45th Annual Small Business Forum. Recently announced. Finders regulation is likely on the agenda.
SEC enforcement pipeline. Watch for additional enforcement actions against unregistered finders in the next six months. The enforcement division may accelerate cases before a new exemption takes effect, creating a "last chance to enforce" dynamic.
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The regulatory landscape for startup fundraising is shifting faster than at any point since the JOBS Act in 2012. The SEC is telling you, in public, on the record, that they know the finders rules are broken and they intend to fix them.
But until the fix arrives, the current rules still apply. And the penalties are real.
Clean up your existing arrangements. Build compliant processes for future rounds. Be ready to move when the exemption drops.
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This article is for informational purposes only and does not constitute legal advice. Every company's situation is different, and you should consult with qualified legal counsel before making compliance decisions based on the developments discussed here.
If your company is planning a capital raise or needs to review existing finder arrangements, this is exactly the kind of strategic compliance work that an Outside General Counsel handles. Consilium Law works with growth-stage companies to build fundraising processes that hold up under regulatory scrutiny.